HF 1241 
. W43 
Copy 1 


TEACHER’S MANUAL 

ANSWERS TO 

Problems and Questions 
in Commercial Law 


Arnon Wallace Welch, M.A., LL.B. 


THE GREGG PUBLISHING COMPANY 

NEW YORK: CHICAGO: BOSTON: SAN FRANCISCO: LONDON 




TEACHER’S MANUAL 

ANSWERS TO 

Problems and Questions 
in Commercial Law 


BY 

ARNON WALLACE WELCH, M.A., LL.B, 

Member of the New York Bar; Author of “Observations on 
Secondary Commercial Education”. 


COPYRIGHT 1924 BY THE 
GREGG PUBLISHING COMPANY 
J 56-F-3 


THE GREGG PUBLISHING COMPANY 

NEW YORK: CHICAGO: BOSTON: SAN FRANCISCO: LONDON 



PREFACE 


HF124/ 

W43 


A new day is dawning—and it is timely—in the 
teaching of commercial law in secondary schools. This 
is the recognition of the value of a modified use of the 
so-called “case method” in presenting any phase of the 
law. 

This does not mean that the course in commercial 
law is to be expanded to comprehend the requirements 
of a lawyer; nor does it mean that the study is to be so 
intensified as to approximate a professional grasp of 
the subjects studied. But it does mean an attempt to 
impart a better functional grasp of the knowledge 
acquired. 

The case method is a form of the laboratory method 
applied to the science of the law. The efficacy of the 
laboratory method is well recognized in the natural 
sciences, accounting, and secretarial studies. Howbeit, 
it had to win its spurs in those fields of study. 

In any science, functional grasp or what is often 
called “a working knowledge” of the subject is ac¬ 
quired only through the application of principles to 
concrete situations. Even for an elementary study of 
a limited number of legal topics it is becoming more 
and more apparent that the concrete situations pre¬ 
sented by well-selected recorded decisions are more 
effective in imparting functional grasp than the per¬ 
petual use of hypothetical cases—“Now, class, sup¬ 
pose A and B”, etc., etc. ^ 

F ’ ©C1A807858 


'K'> 




PREFACE 

tsy this change in method the subject of commercial 
law will keep abreast of the progress made in present¬ 
ing other sciences. 

New York 
July, 1924. 


Arnon W. Welch. 


SUGGESTIONS TO TEACHERS 


This is not a textbook; the pad of problems and 
questions is not a textbook; the two of them together 
are not a textbook. They are intended to supplement 
with laboratory practice any textbook that the teacher 
may use. 

The pad of problems and questions may be used to 
advantage with either of two methods: 

1. Deductive method; 

2. Inductive method. 

If used with the deductive method, the problems and 
questions would be assigned as review and to test the 
student’s mastery of principles. 

If used with the inductive method, which the author 
considers preferable, the problems and questions would 
be used as an incentive for the student to find the rules 
of law applicable to them. In this case, after a pre¬ 
liminary survey and exposition of the assignment for 
the succeeding recitation by the teacher, the problems 
and questions applicable thereto would be assigned as 
homework. The discussion at the next recitation 
would be based upon this assignment. 

The Author. 


IV 


CONTENTS 

SUBJECT PAGE 

Contracts . i 

Infants. i 

Necessaries. 2 

Appointment of an agent. 4 

Wrongful act. 4 

Insanity. 5 

Agreement. 5 

Offer. 5 

Acceptance. 7 

Mistake. 8 

Fraud. 9 

Duress.12 

Undue influence.14 

Illegality.15 

Consideration. 17 

Mutuality.21 

Operation of contract.22 

Assignment.23 

Statute of Frauds. 24 

Performance.27 

Specific performance.33 

Damages.34 

Sale of Personal Property.36 

V 

























VI 


CONTENTS 


SUBJECT PAGE 

Implied Warranties ..50 

Negotiable Instruments.59 

Form and Interpretation.59 

Consideration. 67 

Negotiation. 67 

Holder in Due Course.68 

Liability of Parties.68 

Agency.73 

Partnership.82 

Insurance.94 

Innkeepers.98 

Common Carriers.103 

Fixtures.106 
















TEACHER’S MANUAL 


Answers to Problems and Questions in 
Commercial Law 

CONTRACTS 

INFANTS 


1. 24 Mo. 541. 

(1) The contracts of an infant are voidable at the 
option of the infant. 

(2) Mrs. Peterson is entitled to the land. “Where 
a minor executes a deed of conveyance of land, and 
after attaining majority conveys the same land to a 
third person, the second deed is a disaffirmance of the 
first.” 

2. 15 N. J. Law, 343- 
Robert is entitled to recover. 

“Infancy is a personal' privilege, of which no one 
can take advantage, but the infant himself; and there¬ 
fore though the contract of the infant be voidable, it 
shall bind the person of full age.” 

3 . 56 Minn. 365. 

(1) Martin is entitled to recover. 

An infant may not only disaffirm and avoid per¬ 
formance of an executory contract, but he may also 
recover all payments made on a contract. 

(2) Yes. The contract being voidable at the op- 

1 


2 Contracts PROBLEMS AND QUESTIONS 

tion of the infant only, the Insurance Company would 
be completely bound prior to the disaffirmance. 

Necessaries 

4 . 42 Conn. 203. 

(1) Necessaries are those things requisite to sub¬ 
sistence, health, and education, regard being had to 
one’s income and station in life. 

(2) Yes. The preservation of teeth is necessary 
to the preservation of health. The work done was 
necessary to the preservation of the teeth. The price 
charged was reasonable, and no advantage was taken 
of the infant. 

5 . 64 Conn. 407. 

Gregory is entitled to recover for the time that Lee 
actually used the room, at the rate of $10 a week, 
that being a reasonable charge. “No binding obliga¬ 
tion to pay for necessaries can arise until they have 
been supplied to the infant; and he cannot make a 
binding executory agreement to purchase necessaries.” 

The doctrine of the liability of an infant for nec¬ 
essaries was well stated in the following language: 
“The obligation of an infant to pay for necessaries 
actually furnished to him does not seem to arise out 
of a contract in the legal sense of that term, but out 
of a transaction of a quasi-contractual nature; for it 
may be imposed on an infant too young to understand 
the nature of a contract at all. . . . And where an 
infant agrees to pay a stipulated price for such nec¬ 
essaries, the party furnishing them recovers not 
necessarily that price, but only the fair and reasonable 
value of the necessaries.” 


IN COMMERCIAL LAW Contracts 3 

6. 78 Hun. (N. Y.) 603. 

(1) No. Infants are never liable upon contracts. 
Their contracts are voidable. They are held respon¬ 
sible for payment of the reasonable value of necessaries 
upon grounds of justice and equity—not upon contract. 

(2) No. The term “necessaries” refers to “sup¬ 
plies, which are personal, either for the body as food, 
clothing, lodging, or those necessary for the proper 
cultivation of the mind, as suitable instruction, etc.” 
So, also, necessary medical and dental services. An in¬ 
fant, therefore, could be held for the payment of 
rent, but could not be held for the payment of the 
same amount on bond and mortgage or deed, by virtue 
of which he acquired or would acquire title. 

(3) None. While it is a general rule that infants 
must return the benefits received—if they have them 
—when they disaffirm their contracts, the fact that 
they cannot do so does not keep them from avoiding 
their contracts. In any event, the obligation is to re¬ 
store only that which the infant received. Such is im¬ 
possible in this case. As the court said: “Manifestly 
he could not restore the house without surrendering 
the possession of the land upon which it stood, and 
also the materials furnished by him and the labor he 
had bestowed upon the house, which would have 
amounted to his surrendering that which he did not 
receive from the contractors.” 

7. 4 Wend. (N. Y.) 403. 

Yes. A husband is not bound to support a wife’s 
child by a former marriage. The things furnished 
were necessaries, and the charges were reasonable. 


4 Contracts PROBLEMS AND QUESTIONS 

“An express promise need not be proved to render an 
infant liable for necessaries”; he is liable for reasons 
of justice and equity. 

8 . 

In order to recover from an infant as for neces¬ 
saries, a merchant must allege and prove: 

(a) That the things supplied come within the class 
called necessaries, and state specifically what they were. 

(b) That the infant was not adequately supplied 
with them at the time of purchase; if the infant lives 
at home or has a guardian, the merchant must show 
that the parent or guardian neglected and refused to 
supply the infant upon request. 

(c) That the price charged was reasonable and 
that no advantage was taken of the infant. 

Appointment of an Agent 

9. 99 Mo. App. 513. 

(1) The appointment of an agent by an infant is 
absolutely VOID. 

(2) No. The agreement between Posten and Mr. 
Williams was one by virtue of which Mr. Williams 
attempted to act as an agent for Posten. Posten being 
a minor, the agreement was void. Consequently, he 
has no rights whatever by virtue of the agreement, 
and can recover nothing. 

Wrongful Act 

10. 29 Barb. (N. Y.) 218. 

$60.00, the value determined by the jury. 

This is not a matter of contract. It is a matter of 
wrongful act (tort) causing loss or injury to another, 


IN COMMERCIAL LAW 


Contracts 5 

to which infancy is no defense. Said the court: “If 
the death of the horse resulted from the wrongful act 
of the defendant (Thompson), infancy is no protec¬ 
tion. He is as fully liable for the damages as if he 
had been of full age.” 

Insanity 

11 . 173 Ill. 277. 

(1) No. 

“A completed contract of sale of lands by a grantor 
who is insane but has not been judicially declared in¬ 
sane, for a fair consideration in money or property, to 
a grantee who entered into the contract without fraudu¬ 
lent intent and without knowledge or notice of the disa¬ 
bility of the grantor, will not be set aside in favor of 
the grantor or his representatives unless the purchase 
price be returned or the property parted with by the 
grantee be restored.” 

(2) Void. 

AGREEMENT-OFFER 

12. II III.254. 

(1) The requirements of a good offer are : 

(a) It must be specific and definite, complete 
and independent of itself and not depend¬ 
ent upon other offers for its explanation 
or support. 

(b) It must be communicated by the offeror or 
his authorized agent to the offeree or his 
authorized agent. 

(2) No. Webster and Huntingdon, so far as bids 
are concerned, are entitled to the property. The bids 
of Root & Co. and Ash & Diller were not specific. 


6 Contracts PROBLEMS AND QUESTIONS 

They were a gamble and an evasion of the law. Said 
the court: “Laying out of view the immoral tendency 
. . . of this sort of reckless, desperate gambling 

bidding, ... we have no hesitation in saying 
that it is unfair towards other parties, and that such 
offers ought to be treated as no bids at all.” 

(3) An offer becomes operative when actually re¬ 
ceived by the offeree or an agent of his authorized to 
accept it. 

13 . 17 S. & R. (Pa.) 45. 

No. The promise (offer) of Mr. Sherman was 
void for want of definiteness. It was for one hundred 
acres of land, but did not describe it, give its value or 
designate in any way the particular hundred acres to 
be conveyed to her. 

14 . 8 Pa. 408. 

No. The bid was not definite within the meaning 
of the law. The bid was made on condition that the 
money he applied in a certain way, namely, to an execu¬ 
tion of the bidder. “A bidder has no right to impose 
conditions on his bid.” 

15 . 71 N. Y. 420. 

(1) Legally, the instrument may be approved. It 
constitutes what is known as an option. “One may 
pay for an option to take at a future day, at a certain 
price” either real or personal property. And it does 
not matter that the same instrument contains an option 
either to buy or to sell. An intention to make and 
accept delivery is presumed until the contrary be shown. 

(2) In this event, the agreement would be consid¬ 
ered a wager, therefore illegal and void. 


IN COMMERCIAL LAW 


Contracts 7 


Agreement—Acceptance 
16 . 122 Ky. 457. 

(1) An acceptance must be absolute and uncondi¬ 
tional; 

It must comprehend the whole of the proposition, 
must be exactly equal to its extent and provisions, and 
must not qualify them by any new matter; the parties 
must assent to the same thing, in the same sense; 

The acceptance must be communicated by the offeree 
or his authorized agent (in the case of a bi-lateral con¬ 
tract) to the offeror or his authorized agent. 

(2) It is presumed that the offeree will use the 
same mode of communication as the one used by the 
offeror. 

(3) When the letter is posted or the telegram is 
delivered to the custody of the sending office of the 
telegraph company, the acceptance becomes effective. 

(4) Under these circumstances, the acceptance be¬ 
comes effective when actually received by the offeror. 

(5) Unless there is an agreement for a considera¬ 
tion to hold the offer open for a certain period of time, 
the offeror may withdraw his offer at any time before 
the moment when the acceptance becomes legally effec¬ 
tive. 

(6) A withdrawal becomes effective, if at all, when 
it is actually received by the offeree. 

(7) Mr. Levy was insured for nothing at all. He 
applied for $10,000 of insurance. The action of the 
insurance company was a rejection of his application 
and a counter offer to insure him for $5,000. Inasmuch 
as Mr. Levy died before he acted or could have acted 


8 Contracts PROBLEMS AND QUESTIONS 
upon the counter offer, no contractual relation what¬ 
ever existed between Mr. Levy and the insurance 
company. 

“The assent must comprehend the whole of the pro¬ 
position, it must be exactly equal to its extent and 
provisions, and it must not qualify them by any new 
matter.” 

17 . 

A contract was completed at 12:45 P* m -> when the 
acceptance was wired. 

18 . 119 U. S. 149. 

There was no contract. The negotiations may be 
summarized as follows: 

(1) An offer by the Mill. 

(2) An attempted acceptance by the Railway Com¬ 
pany, which, however, being on different terms from 
that of the offer, constituted a rejection of the offer and 
a counter proposition. 

(3) A second attempt to accept, which was an offer 
of the Railway and not an acceptance. 

(4) Rejection of the counter propositions by the 
Mill. Therefore, no contractual relation ever existed. 
Neither was it necessary for the Mill to reply in order 
to avoid a contract. 

The practical interpretation of this is that in accept¬ 
ing an offer the offeree has only one guess; if that fails 
the negotiations must be resumed all over again, with 
a new offer and another acceptance. 

Mistake 

19 . 103 Mass. 356. 

No. That would constitute a mutual mistake of 
fact, which renders a contract void, because there is 


IN COMMERCIAL LAW Contracts 9 

lacking one of the fundamental elements of every valid 
contract, namely, the assent to the same thing, in the 
same sense. 

20. 38 Pa. 491. 

The administrators of Elisha Harris are entitled 
to the property. Neither party contemplated the sale 
or purchase of the treasures. Said the court:—“The 
contents of the machine are to be distinguished from 
its constituent parts. They were unknown to the ad¬ 
ministrators, were not inventoried, were not exposed 
to auction, were not sold. Of course they were not 
bought. All that was sold was fairly bought, and may 
be held by the purchasers. The title to what was not 
sold remains unchanged. A sale of a coat does not give 
title to the pocket-book which may happen to be tem¬ 
porarily deposited in it, nor the sale of a chest of 
drawers a title to the deposits therein. . . . The 
contents are not essential to the existence or usefulness 
of the thing contracted for, and, not being within the 
contemplation or intention of the contracting parties, 
do not pass by the sale.” 

21. 64 Wis. 265. 

Yes. There was no mistake of identity or of what 
the parties intended to do. The only mistake was with 
regard to value, which is a risk that the parties must 
assume in making contracts. 

Fraud 

22. 77 Penn St. 50. 

(1) The elements of legal fraud are : 

(a) Misrepresenation of a material fact. 


10 Contracts PROBLEMS AND QUESTIONS 

(b) Knowledge of its falsity. 

(c) Intent to deceive. 

(d) Actual deception resulting in damage to 
complaining party. 

(2) No. Mr. Heckler may avoid the contract on 
the ground of fraud. The application of the doctrine 
of fraud is: 

(a) The existence or non-existence of fever 
and ague in a locality is a matter of fact, 
clearly material in this case, and Mr. 
Holmes misrepresented the situation. 

(b) According to Mr. Holmes’ own testi¬ 
mony, he knew that he misrepresented 
the fact. 

(c) One is presumed to intend the conse¬ 
quences of his own acts. What intention 
other than deception could Mr. Holmes 
have had when Mrs. Heckler plainly told 
him that if fever and ague were there they 
would not take the farm. 

(d) The fact of deception is shown by the 
fact that Mr. and Mrs. Heckler relied 
upon the statements of Mr. Holmes in 
entering into the contracts, which they 
had a right to do; the damage would be 
that, with the prevalence of fever and 
ague, the value of the place would not be 
as great as that which constituted a con¬ 
sideration in the contract. 

23 . 49 N. Y. 211. 

The insurance policy is voidable at the option of the 
Insurance Company on the ground of fraud. 


IN COMMERCIAL LAW 


Contracts n 


(a) There was misrepresentation of a material fact 
by evasion and concealment. The question of de¬ 
ceased’s health was put squarely up to the applicant, 
who evaded it by saying, “see surgeon’s report”, when 
he knew that the examining physician had no knowl¬ 
edge of his father’s condition. In order to complete 
the concealment, he denied that his father had had a 
physician. 

(b) Under the circumstances, “knowledge of the 
falsity” of the representation is presumed. 

(c) Likewise, the “intent to deceive” is presumed. 
No other intention is possible, under the circumstances. 

(d) The Insurance Company relied upon the rep¬ 
resentations in the application in issuing the policy; 
they would suffer loss if they should be required to 
pay it. 

24 . 

(1) The gist of fraud by concealment is that one 
by silence or artifice conceals a material fact when 
there is a legal duty upon him to speak. 

(2) Yes. 

(3) Yes. There is no legal duty resting upon A to 
tell B what is in his own land. Consequently, A’s silence 
did not amount to fraud. 

25 . 105 U. S. 553. 

No. The expressions with regard to the value of the 
property were expressions of opinion in regard to 
property the value of which depended upon contin¬ 
gencies that may never occur—however fallacious, 
does not constitute fraud. The misrepresentation must 
be with regard to fact. 


12 Contracts PROBLEMS AND QUESTIONS 

But note carefully the following language of the 
court: “For opinions upon matters capable of accu¬ 
rate estimation by application of mathematical rules 
and scientific principles, such, for example, as the 
capacity of boilers, or the strength of materials, the 
case may be different. So, also, for opinions of parties 
possessing special learning or knowledge upon the 
subjects in respect to which their opinions are given, 
as of a mechanic upon the working of a machine he 
has seen in use, or of a lawyer upon the title of prop¬ 
erty which he has examined.” 

Duress 

26 . 93 Cal. 452. 

(1) Duress is “personal restraint, or fear of per¬ 
sonal injury or imprisonment.” 

“The violence or threats must be such as are cal¬ 
culated to operate on a person of ordinary firmness 
and inspire a just fear of great injury to person, 
reputation, or fortune.” “Person” includes the mem¬ 
bers of one’s family. 

(2) No. The consent of a party to a contract must 
be free, and it is not free when obtained through 
duress or menace. The menace here was a threat of 
injury to the character of Mr. Nightingale. 

(3) No. Under this kind of menace, “It is entirely 
immaterial whether such person is guilty or innocent 
of the crime to be charged.” One has no right to 
make use of a criminal process for the collection of a 
debt. 

(4) Arrest or threats of arrest constituting duress 


IN COMMERCIAL LAW Contracts 13 

(a) For improper purposes without a just cause; 
or 

(b) For a just cause, but without lawful authority; 
or 

(c) For a just cause and under lawful authority 
for unlawful purposes. 

27 . 69 Maine, 376. 

No. Said the court: “Giving full effect to all that 
the evidence shows in regard to the age and infirmity 
of the defendant, and his anxiety to reach home, we 
see nothing in the threats used, or in the situation, to 
excite in his mind a reasonable belief that he was under 
the necessity to give his own note for his son’s debt, 
or a reasonable apprehension of serious consequences 
to himself if he did not sign; nor did he attempt to 
avail himself of the resources at his command to avoid 
compliance.” 

The court intimated that the proper thing for Mr. 
Prescott to do was to attempt to leave, and if resisted, 
make an “outcry” and summon aid to prevent violence. 

28 . 17 Maine, 338. 

No. This is a civil action, not criminal, in which 
arrest is allowed. In a civil action, “a lawful im¬ 
prisonment is no duress;” the imprisonment or threat¬ 
ened imprisonment must be unlawful. 

29 . 57 Ill. 289. 

This is a question of duress of property, upon which 
authorities differ. In the case under consideration, the 
Supreme Court of Illinois held that Spaids was en¬ 
titled to recover back the money and avoid the release. 


14 Contracts PROBLEMS AND QUESTIONS 

In the opinion may be found this crisp statement and 
admirable exposition of the court’s position: 

“Consent is of the essence of all contracts. 

It was not obtained with the consent intended by 
the kw. Property, which required especial care, had 
been, by fraud, perjury and extortion, wrongfully 
taken; was of a perishable nature, and rapidly going 
to destruction. The party having possession refused 
to surrender on payment of the actual indebtedness, 
but demands more than double the sum due, and in 
addition thereto a release for all damages for the 
wrongful acts—for the malicious violation of right 
and law. It would be a scandal to a court of justice 
if a release, given under such circumstances, could not 
be avoided.” 


Undue Influence 
30 . 

(1) 94 Cal. 642. 

Undue influence is “the use by one, in whom a con¬ 
fidence is reposed by another who holds a real or 
apparent authority over him, of such confidence or 
authority for the purpose of obtaining an unfair advan¬ 
tage of his weakness of mind, or of his necessities or 
distress.” 

(2) 43 Iowa 415. 

Yes. While the contracts were executed after their 
majority, the court said it was “before they were 
emancipated from the habit of obedience and defer¬ 
ence to him”; and the execution of the contracts was 
procured by him “by the exercise of his authority, 
by solicitation, and, in one instance, through fear 



IN COMMERCIAL LAW Contracts 15 

excited by false representations. The contract, be¬ 
sides, is unconscionable, the consideration therefor 
being greatly inadequate.” 

Illegality 

31 . 114 Mass. 80. 

(1) Illegal agreements are. void. 

(2) None. The general rule is that where the 
agreement is illegal, whether it be entirely executory 
or executed or executory in part and executed in part, 
the court will leave the parties exactly where it finds 
them. 

(3) Love may recover the money, because, when 
he forbade the stakeholder to pay over the money, 
he withdrew his consent from the illegal agreement 
and ceased to be a party to it. 

(4) Love would not be allowed to recover, not 
because the court would recognize any right to the 
money on the part of Harvey, but because the agree¬ 
ment having been executed with Love as a consenting 
party, the court would leave the parties where it found 
them. 

(5) Absolutely immaterial. Courts do not sit to 
decide wagers. 

32 . 120 Mass. 403. 

The instrument is illegal and void, for the reason 
that the real consideration upon which it was based, 
regardless of that stated in the instrument, was the 
discontinuance of a criminal prosecution against Ed¬ 
ward K. Hood. The court said that “the reason that 
a private agreement, made in consideration of the 
suppression of a prosecution for crime, is illegal, is 


16 Contracts PROBLEMS AND QUESTIONS 


that it tends to benefit an individual at the expense 
of defeating the course of public justice.” 

33 . 171 Mass. ioi. 

(1) Contracts in restraint of trade are objection¬ 
able on two grounds: 

(a) “They tend to deprive the party restrained 
of the means of earning a livelihood.” 

(b) “They deprive the community of the bene¬ 
fit of his free and unrestricted efforts in 
his chosen field.” 

(2) The general doctrine with regard to restric¬ 
tive clauses in connection with the sale of the good will 
of a business is that “the vendor will he hound hy any 
covenant which is reasonably necessary for the pres¬ 
ervation and protection of the property which he 
sells” 

(3) Distinction is made between contracts involv¬ 
ing a general restraint of trade } which are invalid , and 
contracts involving a partial restraint of trade , which 
are valid if not unreasonable . 

34 . 58 Pa. 51. 

The court held that the restrictive clause was valid 
on the ground that it was only a reasonable protection 
for the purchaser of the practice of Dr. McClurg. 

35 . 40 Me. 224. 

Valid. The court held that the restrictive clause in 
the contract of sale was not unreasonable in time or 
territorial extent, and was therefore valid. Conse¬ 
quently, the bond given to insure performance of that 
part of the contract was valid. 


IN COMMERCIAL LAW 


Contracts 17 


36 . 142 Ind. 560. 

The restriction is unreasonable in territorial extent, 
being more than co-extensive with the interests to be 
protected, which would be measured by the market that 
Nunnemaker served. Since it is thus an “unreason¬ 
able restraint of trade,” it was held to be entirely void, 
not only with respect to the remainder of the state, 
but in the city of Hammond as well. 

37 . 51 N. Y. Suppl. 573. 

The validity of the contract was upheld. It was 
held that the restraint of trade involved in the con¬ 
tract was not unreasonable, but “was necessary to 
effectuate the object of the sale of his (Brett’s) good 
will.” 

Consideration 

38 . 

(1) Consideration is the thing given, act done or 
promise made on the part of one party to a contract 
in return for the thing given, act done or promise 
made on the part of the other party. 

(2) Executory contracts are dependent upon con¬ 
sideration. 

(3) Certainly. A gift is a transfer of title and pos¬ 
session without a legal consideration, and may be made 
of real or personal property. A promise to give with¬ 
out a consideration is not enforceable; but a gift is a 
completed act and will not be set aside because of lack 
of consideration. 

(4) The essentials of a valid gift are: 

(a) Words or acts indicating an intention on 
the part of the donor to give : 


18 Contracts PROBLEMS AND QUESTIONS 


(b) Delivery of possession to the donee; 

(c) Acceptance of the gift by the donee. 

(5) A gift of real property may be effected by: 

(a) Preparing and signing a deed, and 

(b) Delivery of the deed to the donee. 

(6) 72 N. C. 176. 

The colt belongs to the administrators of the estate 
of Mr. White. Since there was no change of posses¬ 
sion, the gift was never completed and title never 
passed from father to daughter. 

While this is in accordance with the logic of the 
requirements of a gift, there are cases that have ruled 
more in accordance with the common sense of the 
situation by holding that as between husband and wife 
and parents and children a change of possession is not 
necessary, thus making exceptions to the general rules 
applicable to gifts. 

39 . 

The requirements of consideration are: 

(a) It must have value or be a sustaining detriment 
to the party offering it. 

(b) It must be present or future, constituting a 
new sacrifice that one is not already obligated to make 
or has not already made gratuitously. 

(c) It must be physically possible at the time the 
agreement is made. 

(d) It must be lawful. 

40 . 17 Ind. 29. 

The agreement is void for want of consideration. 
An evaluation of the distinct consideration for the 
promise of Schnell to pay $600 is as follows: 


IN COMMERCIAL LAW Contracts 19 

(a) A promise to pay him one cent. This is inade¬ 
quate to support a promise to pay $600. 

(b) Love and affection he bore his deceased wife. 
“Good,” but not a legally sufficient consideration to 
support a promise. 

(c) Services of the wife in acquisition of the prop¬ 
erty. A past consideration—not sufficient to support 
a promise. 

(d) The wife’s expressed desire in the form of 
an inoperative will. At best, only a moral considera¬ 
tion. Moral considerations, alone, will not support a 
promise to pay. 

(e) The seals have no effect whatever. A seal 
does not import a consideration, as it did at common 
law. It only raises a presumption of consideration, 
where the consideration is not stated. In the agree¬ 
ment in this case, the parties stated all the elements 
of consideration that they had. They are inadequate. 
The seals do not overcome the inadequacy. 

Note:—The court said, in part: 

“It is true, that as a general proposition, inade¬ 
quacy of consideration will not vitiate an agreement. 
But this doctrine does not apply to a mere exchange 
of sums of money, of coin, whose value is exactly 
fixed, but to the exchange of something of, in itself, 
indeterminate value, for money, or, perhaps, for some 
other thing of indeterminate value.” 

The court interpreted the agreement in this case 
to be a promise to make a gift, void for want of con¬ 
sideration. 


20 Contracts PROBLEMS AND QUESTIONS 


41 . 201 App. Div., N. Y. Supr. Ct. 794. 

Held, the plaintiff was not entitled to recover, as 
the contract was without consideration. The alleged 
information was neither new, orginal nor valuable, 
being merely a matter of common knowledge. “When 
information is offered under these circumstances, the 
very nature of the offer suggests that the information 
must be new. To call attention to a fact already 
known is not imparting information.” 

42 . 3 Pick. (Mass.) 207. 

Mr. Mills may not recover. The promise of Mr. 
Wyman was void for want of consideration. A moral 
consideration will not support a promise to pay, and 
the service for which he promised to pay was a past 
consideration. 

43 . 105 N. E. (Mass.) 359. 

Yes. “The privilege of naming a child is a valid 
consideration for a promise to pay money. The child 
has a direct and immediate interest in his name and is 
more affected by it than any one else. He loses the 
opportunity of receiving a more advantageous name, 
and is compelled to bear whatever detriment may flow 
from the name imposed upon him.” 

44 . 33 Ala. 265. 

They are entitled to $2500. The promise to pay 
the second $2500 was without consideration. Johnson 
was obligated by the first contract to bring his wife 
and the two of them teach during the school year for 
$2500. That which one is legally bound to do, whether 
by reason of contract or a public duty, cannot be the 
consideration for a contract. 


IN COMMERCIAL LAW 


Contracts 21 


45 . 231 N. Y. 196. 

Yes. This case is distinguished from 33 Ala. 265 in 
that in the N. Y. case the making of the second con¬ 
tract was accompanied by words and acts indicating 
an intention to cancel the first contract. People enter 
contracts by mutual consent; they may cancel them by 
mutual consent, and at the same time make a new 
contract. But the intention to cancel the first contract 
must be clear; otherwise the second contract will be 
governed by the rule in 33 Ala. 265, above. 

46 . 179 Ill. 150. 

No. The sheriff has a legal duty resting upon him 
to apprehend criminals and give all the information 
he has concerning the case. That which one is legally 
bound to do cannot be the consideration for a contract. 

47 . 203 A. D. 415. 

No. The acceptance of less than a party claims to 
be due on a disputed account is a valid settlement; each 
party sacrifices something and forfeits the right to 
have the dispute adjudicated in a court of law. This 
constitutes sufficient consideration. 

The court held in this case that the terms on the 
check were inseparable from the check itself. Con¬ 
sequently, when the plaintiff accepted and retained 
the check with the “credit allowance” terms on the 
margin, he was deemed as a matter of law to have 
accepted it in full payment of the two contracts. 

Mutuality 

48 . 156 Ky. 6. 

The contract was void for lack of mutuality. This 
appeared in the last paragraph, under which the sec- 


22 Contracts PROBLEMS AND QUESTIONS 

ond party might relieve himself of accepting delivery 
as he desired and for any unforseen reason, whereas 
the party of the first part would be bound by the con¬ 
tract except in case of fire. “Contracts which are 
valid must be mutual and binding upon both parties.” 

49 . 93 Mich. 491. 

The agreement is void for want of mutuality. 
“Under this contract, the plaintiffs must be presumed 
to be the sole judges of whether or not it would pay 
them to do the work, and ofi how long they would 
continue it.” Consequently, the contract was not mutu¬ 
ally binding upon both parties. 

50 . 8 Pa. Co. Ct. 57. 

No. The contract is not enforceable because of lack 
of mutuality. If the Ball Club were allowed to enforce 
that contract with Article 18 in it, they would have a 
claim upon Hallman for the remainder of his life for 
$1400 a season. On the other hand, according to 
Article 17, they might fire him without any cause or 
reason whatever upon 10 days’ notice. Such an agree¬ 
ment is entirely onesided, lacking in mutuality of obli¬ 
gations, and is obnoxious to the law. 

Operation of Contract 

51 . 107 Ill. 540. 

(1) Walker’s contract was with Algy Dean. 

(2) Sweet and Hutchinson, purchasers of the 
bonds, trust deeds, and mortgages, are seeking to en¬ 
force the contract against Walker. 

(3) Yes, according to the weight of authority. 

(4) Yes, according to the decisions of most of the 


IN COMMERCIAL LAW Contracts 23 

states. A contrary view is presented in 98 Mich. 178, 
but has not been largely followed. 

In 107 Ill. 540 the court said: “It is a familiar 
rule, and one well sustained by authority, that where 
one person, for a valuable consideration, makes a 
promise to another for the benefit of a third person, 
such third person may maintain an action upon it.” 

In 7 Cush. (Mass.) 337, approving the same doc¬ 
trine, the court said that “it does not rest upon the 
ground of any actual or supposed relationship between 
the parties, as some of the earlier cases seem to indi¬ 
cate, but upon the broad and more satisfactory basis 
that the law, operating upon the acts of the parties, 
creates the duty, establishes a privity, and implies the 
promise and obligation on which the action is founded.” 

See, also, Lawrence v. Fox, 20 N. Y. 268. 

Assignment 

52 . 84 Cal. 281. 

(1) 

(a) Leases and railroad tickets. 

(others will occur to you.) 

(b) Yes. 

(c) No. 

(2) No. The contract indicates that it is the inten¬ 
tion of the parties for Johnson, himself, to raise it. 

(3) No. Boston Ice Co. v. Potter, 123 Mass. 30. 

(4) No. Performance by another would be an 
essentially different thing from that contracted for. 

(5) No. This involved a credit risk. One cannot 
be compelled, without his knowledge and consent, to 
accept the risk of crediting another. 


24 Contracts PROBLEMS AND QUESTIONS 

(6) Yes. Groezinger was guilty of a breach of 
contract, and since the breach was the “proximate 
cause” of the loss sustained by La Rue, the latter may 
recover. 

The general rule is that property and property 
rights may be sold, transferred or assigned. The 
above instances, (i) to (5) inclusive, are exceptions. 
In the case of La Rue v. Groezinger the court said: 

“(a) There is nothing in the language (of the con¬ 
tract) which excludes the idea of performance by 
another. 

“(b) There is nothing in the nature of the cir¬ 
cumstances of the case which shows that the skill or 
other personal quality of the party was a distinctive 
characteristic of the thing stipulated for, or a material 
inducement to the contract.” 

(7) No. Same as in (5) above. The credit stand¬ 
ing of Groezinger was a consideration in the contract. 

Statute of Frauds 

53 . 1 Cowper’s Reports, 227. 

No. This was a collateral promise to pay, leaving 
Smith primarily liable. It is therefore a promise to 
“answer for the debt of another” within the meaning 
of the Statute of Frauds, and being an oral promise 
Jones could not maintain an action on it. 

54 . 4 R. I. 14. 

Yes. The statute of Frauds does not require a 
formal writing for a “land contract.” The fact that 
it is in pencil is immaterial. The names of the parties 
are there, the land to be conveyed specified and the 


IN COMMERCIAL LAW Contracts 25 

consideration stated, and the court said that the words 
“I agree to sell” impart a concluded agreement, and 
not a mere offer to sell. 

55 . 81 Cal. 280. 

(1) If any credit was in fact given to the company, 
or it was in any degree liable for the indebtedness, 
then the defendant cannot be held as an original con¬ 
tractor, the Statute of Frauds applies, and the evidence 
of the contract must be in writing. 

(2) No. 

(3) No. The credit was actually extended to the 
mining company, consequently, the defendant could not 
be primarily liable, but only secondarily liable, if at 
all. The plaintiffs do not present the written evidence 
required by the Statute of Frauds to prove the second¬ 
ary liability. Therefore, no recovery. 

56 . 66 Me. 337. 

(1) Bird is entitled to maintain his action on the 
entire contract. The statute of frauds affects the rem¬ 
edy only and not the validity of the contract. At 
the time of the suit, the evidence to prove the contract 
was in writing. That is sufficient. 

(2) No. “The current of decisions requires that 

the writing must exist before action brought. 

There is no actionable contract before memorandum 
obtained. The contract cannot be sued until it has 
been legally verified by writing; until then there is no 
cause of action, although there is a contract. The 
writing is a condition precedent to the right to sue.” 



26 Contracts PROBLEMS AND QUESTIONS 


57 . 120 Ill. 26. 

No effect whatever, unless the agreement was in 
writing. It was a promise made “in consideration of 
marriage” and the Statute of Frauds applies. 

58 . 9 Neb. 384. 

No. A lease is not an interest in land within the 
meaning of the Statute of Frauds. Consequently, an 
oral lease is good, unless it otherwise violates the 
Statue of Frauds or some other law. 

“A contract is not void by the statute of frauds, as 
an agreement not to be performed within a year from 
the making thereof, if the performance of it depends 
upon a contingency which may happen within the year, 
although in fact it does not happen until after the 
expiration of the year.” A. Z. and wife may live a 
year and they may not. Consequently, since it is not 
certain that the contract cannot be performed within 
a year from the making thereof, it is not within the 
Statute. 

59 . 

The contract with B is within the Statute. Since 
B, the purchaser, was to mine the coal, the contract 
was one for the sale of an interest in real property. 

The contract with C is not within the Statute. In 
this instance the seller was to mine and deliver, which 
makes the contract one for the sale of personal 
property. 

60 . 48 N. Y. 685. 

No. The contract, by its terms, was not to be 
performed within a year from the time of the making 


IN COMMERCIAL LAW Contracts 27 

thereof, consequently, was “void by the statute of 
frauds,” because it was not in writing. 

61 . 187 N. Y. S. 666 (March 23, 1921). 

(1) It is a contract for the “sale of goods,” because 
the coats were the kind manufactured in the usual 
course of Funt’s business for the general market. 

(2) At the time of the breach the contract was 
enforceable even though not in writing, because it 
had been taken out of the Statute of Frauds both by 
part delivery and part payment. 

Note:—It is no longer necessary to present three 
rules—the English rule, the Massachusetts rule, and 
the New York rule. The Uniform Sales Act, adopted 
by most of the states, has codified the law on this point, 
which, incidentally, adheres to the Masschusetts 
rule. There are a number of New York cases in which 
the courts state affirmatively that the Sales Act has 
changed the former common-law rule of the State. 

If the article is to be made “especially for and ac¬ 
cording to the plans of another,” it is a contract for 
“work and labor, and not within the statute;” but if 
the article to be made and delivered is of a kind which 
the producer usually has for sale in the course of his 
business, it is a contract for sale and must be in 
writing.” 

Performance 


62 . 88 Mo. 285. 

(1) Corporation X: 

(a) No. “The obligation to build is founded upon, 
and is his own voluntary contract, and its non-perform¬ 
ance is not excused by inevitable accident.” This is 


28 Contracts PROBLEMS AND QUESTIONS 

governed by the general rule that “impossibility arising 
after the contract is made does not excuse per¬ 
formance.” 

(b) No. The contract was to build a house entire 
and complete. Where one is not legally excused from 
performance, the general rule applies that one may not 
maintain an action on contract until he has fully and 
completely performed his part. 

(c) Yes, if they claim and prove damages. The 
law abhors “penalties and forfeitures,” and the courts 
survey penalty clauses in contracts with suspicion and 
prejudice. 

(2) Corporation Y: 

(a) Yes. This is an exception to the rule stated in 
(a) above. Where one contracts to expend material 
and labor on a building, the law implies an agreement 
on the part of the owner to have and keep the building 
ready for the contractor’s work. 

(b) Said the court: “According to the weight of 
the American authority such a contract is severable to 
the extent that the mechanic may recover for work 
done up to the time of the fire. In this case the re¬ 
covery should include the fixtures on the floor as well 
as those in place.” 

The fixtures not in place were included in the re¬ 
covery on the ground of an “implied contract” that the 
mechanics would have a “reasonable time” to put the 
fixtures in place, which they did not have on account 
of the fire. 

(c) Certainly not, because they were legally excused 
from performance. 


IN COMMERCIAL LAW 


Contracts 29 


63 . 25 Conn. 530. 

Judgment for plaintiff. The “act 'of God” will ex¬ 
cuse the non-performance of a duty created by law, but 
not of one created by contract. 

64 . 137 Wis. 169. 

(1) Substantial performance :— 

“Where a builder has in good faith intended to com¬ 
ply with the contract, and has substantially complied 
with it, although there may be slight defects caused by 
inadvertence or unintentional omissions, he may re¬ 
cover the contract price, less the damage on account of 
such defects.” 80 N. Y. 312. 

(2) The architect may recover the full amount of 
both contracts, less $400. 

65 . 

“A”.—The facts in this problem were taken from 
125 Mich. 144 (1900), which jurisdiction followed 
the “English rule that the contract survived unless the 
breach was equivalent to a repudiation or abandon¬ 
ment —an absolute refusal to proceed with the con¬ 
tract. Under this rule a contract for installment deliv¬ 
eries was considered divisible. 

In the celebrated case of Norrington v. Wright, 115 
U. S. 188, the United States Supreme Court laid down 
what became known as the American rule, namely, that 
a contract for the sale of a quantity of goods to be 
delivered by installments, payments upon each delivery, 
was one entire contract, not divisible into as many con¬ 
tracts as there were installments. 

However, it should be observed that in the latter 
case out of five successive deliveries the vendor com- 


3 o Contracts PROBLEMS AND QUESTIONS 

plied with the terms of the contract in only one (the 
fourth). Whereas, in the Michigan case the buyer 
refused payment of one installment until another 
should be received. He paid for each shipment after 
the next succeeding shipment had been received. 

English authority is cited in support of the decisions 
in both of the above cases, and it well seems that under 
the English decisions the buyer was more favored than 
the seller. Lord Chancellor Selborne said in one case 
that the grounds for the decision were “applicable only 
to the case of a failure of the buyer to pay for, and not 
to that of a failure of the seller to deliver.” 

The general doctrine with regard to entire and divi¬ 
sible contracts, as it pertains to delivery and payment 
by installments, has been codified by the Uniform Sales 
Act, Section 45, subdivision (2), as shown in the fol¬ 
lowing answer to question (1) : 

(1) .“it depends in each case on the 

terms of the contract and the circumstances of the case, 
whether the breach of contract is so material as to 
justify the injured party in refusing to proceed further 
and suing for damages, for breach of the entire con¬ 
tract, or whether the breach is severable, giving rise 
to a claim for compensation but not to a right to treat 
the whole contract as broken.” 

And, as stated in 222 N. Y. 449 (1918), “The sta¬ 
tute thus establishes a like test for vendor and for 
vendee.” 

This is known as the materiality test, which is ampli¬ 
fied in the following answer to question (2) : 

(2) 222 N. Y. 449. 

“The vendor who fails to receive payment of an 




IN COMMERCIAL LAW 


Contracts 31 

installment the very day that it is due, may sue at once 
for the price. But it does not follow that he may be 
equally precipitate in his election to declare the con¬ 
tract at an end. That depends upon the question 
whether the default is so substantial and important 
as in truth and in fairness to defeat the essential pur¬ 
pose of the parties. Whatever the rule may once have 
been, this is the test that is now prescribed by statute. 
The failure to make punctual payment may be material 
or trivial according to the circumstances. We must 
know the cause of the default, the length of the delay, 
the needs of the vendor, and the expectations of the 
vendee. If the default is the result of accident or mis¬ 
fortune, if there is a reasonable assurance that it will 
be promptly repaired, and if immediate payment is not 
necessary to enable the vendor to proceed with per¬ 
formance, there may be one conclusion. If the breach 
is willful, if there is no reparation, if the delay has been 
substantial, or if the needs of the vendor are urgent 
so that continued performance is imperilled, in these 
and in other circumstances, there may be another con¬ 
clusion. Sometimes the conclusion will follow from all 
the circumstances as an inference of law to be drawn 
by the judge; sometimes, as an inference of fact to be 
drawn by the jury.” 

(3) The decision on the facts in problem A. was 
that Bechtel was not excused from performance, 
and that West & Co. were entitled to recover damages 
on the entire contract. 

This decision was given something over twelve years 
before the Uniform Sales Act went into effect in Michi¬ 
gan. It seems, however, that it did not represent the 


32 Contracts PROBLEMS AND QUESTIONS 

weight of American authority, which was that “failure 
to pay for one installment by the buyer excuses the 
seller from delivering the rest.” 181 N. W. 313. 

“B”.—222 N. Y. 449 (1918)—something over six 
years after the adoption of the Uniform Sales Act in 
New York. 

(1) Judgment for the plaintiff (seller) for the price 
of the films delivered, but not for future profits on the 
entire contract. Said the court: The findings in this 
case do not enable us to say that the plaintiff was justi¬ 
fied in its precipitate election to declare the contract at 
an end.” 

It will be observed that, despite the different theories 
about the test to be applied, the practical effect of the 
decisions in the above two cases was the same in this 
respect: In neither case did the default in payment 
by the buyer constitute a breach of the entire contract. 
However, this appears to be merely a coincidence, and 
no general conclusion may be drawn therefrom. All 
that the New York case decided is that in that partic¬ 
ular case the default in payment was not sufficiently 
material to the performance to constitute a breach that 
would justify the seller in terminating the contract. 

(2) None. Each case must be decided on its merits. 

(3) Complications may be avoided on this point 
by stipulating in the contract the entire or divisible 
nature of the agreement. 

66. 54 Cal. 228. 

(1) “If one voluntarily puts it out of his power to 
do what he has agreed, he breaks his contract, and is 
immediately liable to be sued therefor, without de- 


IN COMMERCIAL LAW Contracts 33 

mand, even though the time specified for performance 
has not expired.” 

(2) S. Wolf may sue immediately on the note. By 
selling the mines, Marsh “voluntarily put it out of his 
power ever to realize any profits from the mines.” 

67 . 24 Minn. 354. 

Weber is entitled to nothing. The contract was 
“entire.” Weber was not entitled to anything until 
he performed his part of the contract, and found a 
purchaser willing to buy the whole farm. This he did 
not do.” 


Specific Performance 

68 . 

(1) No. The wood had no “peculiar value” of it¬ 
self. It was a commodity of commerce in which they 
were dealing for profit. The loss to West & Co. could 
be readily ascertained and they could be compensated 
in money, which would be an adequate remedy. “Spe¬ 
cific performance” will never be decreed where the in¬ 
jured party would have an adequate remedy in a suit 
for damages. 

(2) Yes. Land has been held to have a peculiar 
value, and in the event of a breach of contract to sell, 
the loss to the purchaser is not easily ascertainable, 
consequently, a suit for damages would not afford an 
adequate remedy. Therefore, specific performance 
is allowed. 

(3) Where personal property has some rare or 
peculiar value not ascertainable in the markets of the 
world, contracts to sell will be specifically enforced. 


34 Contracts PROBLEMS AND QUESTIONS 

Examples are rare paintings, pictures, statuary, books, 
coins, etc. 

(4) 14 N. Y. S. 134 (March 9, 1891) 

Yes. Where a promised service is of a special, 
unique, or unusual and extraordinary or intellectual 
character which gives it peculiar value, the loss of 
which cannot be reasonably compensated in damages, 
equity will grant some relief. The person cannot be 
compelled to render the service contracted for, but 
can be prevented from serving anyone else. 

Damages 

69 . 67 Conn. 473. 

(1) “The general intention of the law giving dam¬ 
ages in an action for the breach of a contract like the 
one here in question, is to put the injured party, so far 
as it can be done by money, in the same position that 
he would have been in if the contract had been per¬ 
formed.” 

(2) Where there is an ascertainable market price, 
“the general rule is that the plaintiff is entitled to re¬ 
cover in damages the difference at the time and place 
of delivery” between the agreed price and the market 
price. 

(3) Where there is not an ascertainable market 
price, recovery in damages is “confined to such as re¬ 
sult from those circumstances which may reasonably 
be supposed to have been in the contemplation of the 
parties at the time they made the contract.” 

(4) Since only that which the parties know at the 
time the contract is made can be “in the contemplation 
of the parties,” the seller should be apprised of the 


IN COMMERCIAL LAW Contracts 35 

use that the buyer intends to make of the goods, if the 
buyer is to be allowed to recover all the damages that 
result from a breach of the contract by the seller. 

(5) No. In carrying out the general intention of 
the law, “it must be remembered that the altered posi¬ 
tion to be redressed must be one resulting directly 
from the breach.” 

(6) The plaintiff is entitled to recover as damages 
the difference between his contract price with the de¬ 
fendant and the price or prices which others had con¬ 
tracted to pay the plaintiff for the remaining undeliv¬ 
ered portion of the goods. 

70 . 71 . 72 . 

Construction problems to be graded according to 
the judgment of the teacher upon the merit of the work 
of each student. 


36 Sales 


PROBLEMS AND QUESTIONS 


SALE OF PERSONAL PROPERTY 
(Based upon Uniform Sales Act.) 

1 . 

A sale is a contract in which the title passes immedi¬ 
ately from seller to buyer. The passing of the title 
makes the contract “executed.” 

A contract to sell is a contract by virtue of which the 
title is to pass at some future time. It is executory. 

2. 167 N. Y. S. 43 (54N. Y. 173). 

Yes. The distinction between barter and sale is now 
obsolete. The Sales Act distinctly says that “the 
price may be made payable in any personal property.” 
Consequently, barter is now classed with sale. 

3 . 88 Conn. 314 (July, 1914). 

No. “The furnishing of food to a customer by 

restaurant keepers.does not constitute a 

sale within the meaning of the Sales Act.” The court 
said, further: “The customer does not become the 
owner of the food set before him, or of that portion 
which is carved for his use, or of that which finds a 
place upon his plate or in side dishes set about it. No 
designated portion becomes his. He is privileged to 
eat and that is all. The uneaten food is not his. He 

cannot do what he pleases with it. 

He may not turn over unconsumed portions to others 
at his pleasure, or carry away such portions. The true 
essence of the transaction is service in the satisfaction 




IN COMMERCIAL LAW 


Sales 37 

of a human need or desire—ministry to a bodily want. 
A necessary incident of this service or ministry is the 
consumption of the food required. The consumption 
involves destruction, and nothing remains of what is 
consumed to which the right of property can be said 
to attach. Before consumption title does not pass; 
after consumption there remains nothing to become 
the subject of title. What the customer pays for is 
the right to satisfy his appetite by the process of 
destruction. What he thus pays for includes more than 
the price of the food as such. It includes all that 
enters into the conception of service, and with it no 
small factor of direct personal service. It does not 
contemplate the transfer of the general property in 
the food supplied as a factor in the service rendered.” 

4 . 191 Mich. 64 (1916). 

(1) It is an executory contract to sell. 

(2) The test is the intention of the parties. In this 
case the intention is determined by the language of the 
contract, “shall and will sell”—future tense. 

(3) No. It was a valid contract to convey title at 
some future time. 

5 . 174 N. Y. S. 143 (1919)- 

(1) Both at common law and under the Sales Act 
the transaction is a bailment, because there was an 
obligation to deliver back the same silk. It matters 
not that it was in different form. 

(2) The title was all the while in plaintiff. In 
bailment there is a transfer of possession only—not of 
title. 

(3) The loss falls upon the plaintiff. He may not 


38 Sales PROBLEMS AND QUESTIONS 

recover the value of the silk. Loss follows title, un¬ 
less it can be shown that the loss occured by reason 
of the negligence or wrongful act of some one other 
than the owner. 

6 . 

The essentials are the same as in any other contract 
—competent parties, offer and acceptance, considera¬ 
tion. 

7 . 

(1) None whatever. 

(2) A finder has a right to the property against 
all the world except the true owner. 

(3) Not ordinarily. It is different, however, in the 
case of negotiable instruments. 

8 . 

(1) The general rule is that one may not pass a 
better title than he himself has. 

(2) The exceptions are: Pledges, Commission 
Merchants having possession of the goods, Holders of 
Negotiable Instruments, and those in possession of 
property under circumstances raising a presumption 
of ownership. 

9 . 197 App. Div. (N. Y.) 214. (1921). 

The automobile company has title to the touring 
car. “Where a person having sold goods continues 
in possession of the goods, or of negotiable documents 
of title to the goods, the delivery or transfer by that 
person, or by an agent acting for him, of the goods or 
documents of title under any sale, pledge, or other dis¬ 
position thereof, to any person receiving and paying 
value for the same good faith and without notice of 


IN COMMERCIAL LAW 


Sales 39 

the previous sale, shall have the same effect as if the 
person making the delivery or transfer were expressly 
authorized by the owner of the goods to make the 
same.” 

10 . 108 Mass. 347. 

(1) The apparent intention was to make a present 
sale, i.e., actually pass title to the halibut to be caught 
on that voyage. This is indicated by the words “here¬ 
by sell, assign and set over,” which are words of con¬ 
veyance used in an executed sale. 

(2) The legal effect was a “contract to sell,” which 
does not pass title. It is the same now under the Sales 
Act, which says: “Where the parties purport to effect 
a present sale of future goods, the agreement operates 
as a contract to sell the goods.” 

(3) John Low & Son—the sellers. 

11 . 94 Conn. 446 (1920). 

(1) The purport of the contract was to make a 
present sale—pass title. 

(2) The legal effect was a “contract to sell”—title 
did not pass, because the goods were unascertained. 
The court said that both ‘^selection and separation” of 
the No. 1 potatoes were necessary before they were 
“ascertained goods.” 

(3) Mitchell. “Where there is a contract to sell 
unascertained goods, no property in the goods is trans¬ 
ferred to the buyer unless and until the goods are 
ascertained.” 

12. 187 App. Div. (N. Y.) 555 (1919)* 

The effect of the order and acceptance was a “con¬ 
tract to sell.” Title did not pass, because the goods 


4 o Sales PROBLEMS AND QUESTIONS 

were not, at the time, ascertained. Said the court: 
“Any 6,000 pounds of goods described would answer 
the requirement of the contract, whether they were 
then on hand or to be manufactured by the seller, or 
to be acquired by him from others.” 

13 . Sales Act. Sec. 18. 

(1) The intention of the parties. Note, though, 
that the intention of the parties, however clearly ex¬ 
pressed and insistent, cannot pass title unless the good 
be “specific or ascertained.” 

(2) In determining the intention of the parties, 
“regard shall be had to the terms of the contract, the 
conduct of the parties } usages of trade, and the circum¬ 
stances of the case” 

14 . 43 Nev. 208 (1919). 

(1) The hay was treated as “fungible goods; ” the 
potatoes were not. The potatoes were to be selected 
according to certain specifications and quality. There 
was no reservation in the contract for the selection 
from any part of the mass of hay. The seller reserved 
“about thirty tons,” which might have come from any 
part of the stacks. Therefore, Section (6) of the Sales 
Act applies to the hay. 

(2) Yes, the contract was for the sale of specific 
hay in two ascertained stacks. 

(3) According to the contract, apparently nothing 
remained to be done to put the hay in a deliverable 
state. 

(4) No. The contract of sale was absolute and 
unconditional. 

(5) Apparently the hay was to be delivered on the 


IN COMMERCIAL LAW • Sales 41 

spot, turned over to the buyer right there in the field, 
when measured. This is indicated by the reference 
to “feeding” and the words “to be delivered at once 
when measured.” 

(6) No. 

(7) It purports to be a sale—“Bought of” and “I 
have sold” indicate a completed sale. 

(8) The court held that the measuring was a con¬ 
dition precedent to passing the title, not for the pur¬ 
pose of ascertaining the price to be paid nor to put the 
hay in a deliverable state, but “something further to be 
done to carry out the bargain.” The measuring was 
necessary to separate the thirty tons reserved by 
Cassinelli so that the buyer could feed from the stacks 
to his cattle without incurring the danger of feeding 
any portion of the thirty tons reserved. 

(9) The loss falls on Cassinelli, because the title 
had not passed. 

15 . 103 Iowa, 389. 

(1) The oral contract was enforceable, by reason 
of the payment of $50 of the purchase price. 

(2) The court held that since the intention of the 
parties to make immediate sale was clear, title passed 
to so much of the corn as could pass under the cir¬ 
cumstances. Consequently, it was held that the title 
to the 1600 bushels in the unbroken crib had passed to 
the buyer, but that as the seller had not decided 
definitely how much corn he wanted to reserve, some¬ 
thing remained to be done to complete the bargain and 
that title did not pass to any of the corn in the broken 
crib. 


42 Sales PROBLEMS AND QUESTIONS 

(3) The buyer bears the loss of the 1600 bushels 
in the unbroken crib; the seller bears the loss of the 
700 bushels in the broken crib. 

16 . 146 Minn. 109 (1920). 

The plaintiff (Superior Box Co.) owns the lumber. 
The conduct of the parties at the time of the sale indi¬ 
cated an intention to pass title immediately. There 
was an unconditional contract to sell specific, ascer¬ 
tained goods in a deliverable state, and the buyer was 
allowed to treat the lumber as his own. The fact that 
it was subsequently to be shipped to Superior and there 
scaled (or measured) for the purpose of ascertaining 
the total amount to be paid by the buyer to the seller 
has nothing to do with the passing of the title. Title 
passed to the buyer when the contract was made. 

17 . 195 App. Div. (N. Y.) 207 (1921). 

(1) Entire. 

(2) Upon this point the court was divided. Three 
judges concurred in the opinion that title passed to all 
three bales when the worsted clippings were baled and 
tagged. “They were staple goods, ascertained, in 
existence and at the time of the contract in possession 

of the seller.There was no sample to 

which they were required to conform, and no process 
of manufacture through which they had to go, to put 
them in deliverable shape; they needed merely to be 
gathered and selected from the mass, baled and 
tagged.” 

Two judges dissented on the ground that the selec¬ 
tion of worsted clippings was not “from the same kind” 
of goods, but from clippings of different colors and dif- 



IN COMMERCIAL LAW 


Sales 43 

ferent grades, that there was never any approval by the 
buyer of the selection made by the seller; consequently, 
title never passed to the bale of worsted clippings; and 
since the contract was entire the title could not have 
passed to any of the clippings. 

18 . 189 App. Div. 542 (N. Y.) (1919). 

(1) The defendant purchaser owned the 21 bushels 
of potatoes that rotted. Title passed when they w T ere 
set aside for him and he was notified. 

(2) No. After the title passed they were his as 
effectively as though he had raised them himself, and 
if he chooses to let his own property rot, that is his 
loss. 


19 . 162 Wis. 355 (1916). 

The Cable Company, manufacturer, has title to the 
piano. Something remained to be done to put the 
piano in a deliverable state, and title could not pass 
until that thing was done. 

20. 194 App. Div. (N. Y.) 149 (1920). 

(1) Yes. The payment of $350 on the purchase 
price of the hay complied with the statute of frauds. 

(2) No. Something remained to be done by the 
seller to put the hay in a deliverable state—pressing 
and baling, in which he was to participate. 

21. 93 Conn. 102 (1918). 

(1) The title passes “on delivery.” 

(2) Absolute title passed to the gas and electric 
fixtures. 

Conditional title passed to the plumbers’ supplies. 


44 Sales PROBLEMS AND QUESTIONS 

The condition was the buyer’s right to return if he 
found the goods unsalable. 

(3) Yes. The right to return was an essential part 
of the contract, not affected in the least by the buyer’s 
payments in order to profit by a temporary advantage 
—the 2 per cent discount. 

(4) It would be the loss of the buyer, because title 
was in him until the goods were returned. 

22. 160 App. Div. (N. Y.) 712 (1914). 

(1) No. The mere fact that the goods were 
delivered “on a thirty days’ trial” does not import an 
intention to buy them. The court said: “The Legisla¬ 
ture did not intend to attempt to enforce a sale where 
goods have merely been delivered on trial. Goods are 
often thus delivered with a view to negotiating a sale 
if the test proves satisfactory.” 

(2) In the seller; so provided by the Sales Act 
as well as the common law. 

(3) No. “The defendant would have a reason¬ 
able time after the expiration of the period for the 
test” in which to signify his approval or disapproval. 

(4) None whatever. The defendant played safe 
and avoided all liability. 

23 . 88 Conn. 130 (1914). 

(1) The breach became effective shortly before 
July 22. The attempted repudiation on June 18 was 
not accepted by the plaintiff. The repudiation was 
made final just before July 22. 

(2) The title was in the seller (plaintiff), for the 
reason that the goods were unascertained and had not 


IN COMMERCIAL LAW Sales 45 

been appropriated to the contract. Sec. 19, Rule 4, 
Sales Act. 

(3) Yes. The plaintiff was within his rights in 
considering the contract at an end and reselling the 
goods for the purpose of fixing the damages. He does 
not have to wait until the expiration of the time for 
delivery. 

24 . 181 N. W. 345 (1921). 

(1) Yes, as an oral sale of goods. 

(2) In the buyer. The goods were “future goods,” 
but there was an unconditional appropriation to the 
contract, with the implied assent of the buyer. Title 
then passed. His refusal to accept delivery does not 
divest him of title. 

(3) Yes. The performance on the part of the 
seller, doing all that he was obligated to do, took the 
case out of the statute of frauds, the title passed, con¬ 
sequently, the action can be maintained. 

25 . 260 Pa. St. 540 (1918). 

(1) The parties, by their agreement, made it a 
contract of purchase and sale and not bailment, accord¬ 
ing to the construction of the court. 

(2) Title to goods in process and finished goods 
was in Marley company. Said the court: “The initial 
sentence of the contract is meaningless, even as between 
the parties, if the title to the manufactured product is 
not in that company. How can the company agree to 
‘sell and deliver’ what it proposes to make if it have 
no title thereto when the process of manufacture is 
complete? And why should the present claimant agree* 


46 Sales PROBLEMS AND QUESTIONS 

to ‘buy and pay for,’ at a stipulated rate, that which 
he already owns?” 

According to contract, title to the raw materials re¬ 
mained in the Enterprise Company, but as to the pro¬ 
duct “when the raw materials could no longer be iden¬ 
tified, the contract is silent and, as between the parties, 
there is no escaping the conclusion that title to the 
product was in the Marley Company and it was this 
property that the Marley Company agreed to ‘sell and 
deliver’ and the Enterprise Company agreed to ‘buy 
and pay for’.” 

(3) The goods would be appropriated to the con¬ 
tract when loaded on the cars at the place of manu¬ 
facture. 

(4) Prior to this appropriation (the loading) the 
title to the goods was in the Marley Company, and 
their creditors could therefore attach the same. As 
soon as the goods were loaded on the cars, such appro¬ 
priation qf the goods to the contract immediately 
passed title to the Enterprise Company, consequently, 
the goods would no longer be subject to attachment by 
creditors of the Marley Company. 

26 . 193 App. Div. (N. Y.) 126 (1920). 

(1) The “custom of the trade”. 

(2) No, because “a different intention appears.” 
By custom and usage the term “c. i. f.” has been ac¬ 
cepted as indicating an intention to place the risk of 
loss on the buyer, even though the seller is, apparently, 
to deliver at a certain destination. 

(3) “Under such contracts the seller fulfills all of 
his obligations by putting the cargo on board and for- 


IN COMMERCIAL LAW 


Sales 47 

warding to the purchaser a bill of lading and a policy 
of insurance of the kind then current and customarily 
issued in trade.” 

(4) Upon delivery of goods to the carrier. 

(5) Loss falls on the buyer, because title has passed 
to him, and loss follows title. 


27 . 

(1) Upon delivery of goods to carrier at place of 
shipment. 

(2) Upon delivery at destination. 

(3) Upon delivery at destination. 197 App. Div. 
(N. Y.) 187. 

(4) Upon delivery “on cars” at place of shipment. 

(5) Upon delivery to carrier. 

(6) By the weight of authority, title passes upon 
delivery of the goods to the carrier, the seller retain¬ 
ing the “right of possession” to secure the payment of 
the price. 

28 . 

(1) Where the title has passed and the buyer re¬ 
fuses to perform, the seller may: 

(a) Sue for the contract price, or, 

(b) Retain possession of the goods for the 
contract price or, 

(c) If the buyer has become insolvent, he may 
stop the goods while in transit and regain 
possession or, 

(d) Resell the goods or, 

(e) Rescind the sale and appropriate the 
goods to his own use. 


4 8 Sales PROBLEMS AND QUESTIONS 

(2) Where the title has passed and the seller re¬ 
fuses to perform, the buyer may: 

(a) Maintain an action to secure possession 
of the goods or, 

(b) Recover the value of the goods. 

29 . 

(1) Where the title has not passed, and the buyer 
refuses to perform, the seller may: 

(a) Sue for damages for breach of contract, 
and rescind, resell or withhold delivery; 

(b) Sue for the contract price if the price was 
payable on a day certain, irrespective of 
delivery or of transfer of title; 

,(c) Sue for the price if the goods “cannot 
readily be resold for a reasonable price.” 

(2) Where the title has not passed, and the seller 
refuses to perform, the right of the buyer is to sue for 
damages. 

30 . 

“The measure of damages is the loss directly and 
naturally resulting in the ordinary course of events” 
from the breach of the contract, 

The usual method of measuring or determining 
damages in sales contracts is by estimating the differ¬ 
ence between the contract price and the market price 
at the time and place of delivery or acceptance, or, 
if no time was fixed, then at the time of the refusal to 
deliver or accept. 

31 . 226 Mass. 316 (1917). 

(1) Yes. It was a “statement of fact inducing the 
sale.” 


IN COMMERCIAL LAW 


Sales 49 

(2) No. This would materially add to the obliga¬ 
tions on a contract the terms of which were expressed 
in writing. The written instrument may not be so 
varied by oral statements. 

32 . 164 N. Y. S. 377 (1917). 

None of them constitutes an express warranty. They 
are mere “puffing” or “dealer’s talk.” 

“No particular phraseology is necessary, but there 
must be an express and direct affirmation of the kind, 
character or description of the goods upon which the 
purchaser relies.” 

33 . 129 Md. 102 (1916). 

Held to be a warranty of serviceability for four 
years, with proper use, care, and treatment. 

34. 85 Misc. (N. Y.) 499 (1914). 

(1) The guaranty was a “warranty that the auto¬ 
mobile is at the time of the sale of sufficiently good 
workmanship and materials to run a year under or¬ 
dinary and proper use without manifesting defects.” 

(2) Yes. There was a breach of warranty, and 
for such breach rescision is one of the remedies of the 
buyer. 

(3) Yes. In case of breach of warranty, the buyer 
has also this remedy. He must take his choice of 
remedies. 

(4) Yes. “In such cases the injured party must 
act promptly, as soon as he discovers the supposed 
breach of warranty.” 

35 . 83 Conn. 666 (1910). 

No. Soundness refers to health and structure of 
the animal. Said the court: “It had a bad trait, which 


50 Sales PROBLEMS AND QUESTIONS 

developed into a bad habit, which impaired its value. 
But such traits or habits constitute a vice rather than 
unsoundness. Not everything which impairs the value 
of an animal constitues unsoundness.” 

36. Implied Warranties. 

(1) Title: 

That the seller has or will have good title; quiet 
enjoyment against lawful claims; free from encum¬ 
brances. 

(2) Sale by description (or) (and) sample: 

That the goods shall correspond with the descrip¬ 
tion or to the sample or to both, if the sale was both 
by description and sample. 

(3) Quality: 

(a) Fitness for particular purpose, where 
buyer makes known to seller the particular 
purpose for which the goods are required 
and relies on the seller’s skill or judgment, 
except in the case of articles sold under 
“patent or other trade name.” 

(b) Merchantable quality in sale of goods by 
description. 

(4) Sale by sample : 

(a) Bulk shall correspond with sample. 

(b) Reasonable opportunity of comparing 
bulk with sample. 

(c) Merchantability, where seller is dealer in goods 
of that kind. 

37. 

“Let the buyer beware.” “If the buyer has exam¬ 
ined the goods, there is no implied warranty as regards 


IN COMMERCIAL LAW Sales 51 

defects which such examination ought to have 
revealed.” 

38 . 176 N. W. 129 (1920). 

(1) Yes. The facts show that the buyer relied on 
the judgment of the seller in the matter of the substi¬ 
tute bulbs, which were not covered by the written con¬ 
tract, and the seller knew the purpose for which the 
buyer wanted them. Therefore, there was an implied 
warranty of fitness for that purpose. Under the Sales 
Act, it is immaterial that the seller is not the “grower 
or manufacturer.” 

(2) Judgment for the defendant in the amount of 
$843.26. “The measure of damages for breach of 
warranty is the loss directly and naturally resulting, 
in the ordinary course of events, from the breach of 
warranty.” Sales Act. Section 69, (6). 

39 .. 265 Fed. 783 (1920). 

(1) Yes. This is shown by the fact that it was 
immediately resold for $5.50 a ton. 

(2) Yes. The correspondence “impliedly” in¬ 
formed the seller of the particular purpose for which 
the coal was wanted—“bunker coal.” 

(3) Yes. The buyer did not inspect coal, but relied 
upon the seller’s judgment in supplying bunker coal, 
and the coal was not fit for that purpose. 

(4) Yes. Sales Act, Section 69, (1), (d). 

40 . 90 N. J. L. 584 (1917). 

(1) There was an implied warranty that the fer¬ 
tilizer was “crudefish.” 

(2) Yes. Sales Act, Section 69. (6). 


PROBLEMS AND QUESTIONS 


52 Sales 

41 . 225 N. Y. 70 (1918). 

(1) Yes. Said the court: 

“We think that the mere purchase by a customer 
from a retail dealer in foods of an article ordinarily 
used for human consumption does by implication make 
known to the vendor the purpose for which the article 
is required. Such a transaction standing by itself per¬ 
mits no contrary inferences. 

“But we think further that such a purchase, where 
the buyer may assume that the seller has the opportun¬ 
ity to examine the article sold, unexplained, is also 
conclusive evidence of reliance on the seller’s skill or 
judgment.” Massachusetts courts adhere to the first 
part of the above statement, but not to the second, 
holding that evidence other than the sale must be in¬ 
troduced to show that the buyer relied upon the seller’s 
skill and judgment. 

(2) Yes, for breach of warranty. Sales Act, Sec¬ 
tion 69 (6). 

42 . 229 N. Y. 473 (1920). 

This case was decided by a divided court in favor 
of the defendant city—four judges concurring in the 
decision and three dissenting; The case is an excellent 
one for class discussion, debate, socializing the subject 
and co-ordinating commercial law and civics. The 
opinion and dissenting opinions are clear, lucid state¬ 
ments on both sides of the question, but are too lengthy 
to be here presented. 

The essential points in the decision of this case 
were: 

(a) “A municipal corporation in aggregating and 


IN COMMERCIAL LAW Sales 53 

supplying water for the extinguishment of fires dis¬ 
charges a governmental function.” 

“In operating a water works system, distributing 
water for a price to its inhabitants, it acts in its private 
or proprietary capacity f in which it is governed by the 
same rules that apply to a private corporation so act¬ 
ing ” 

(b) . . . . “A private water company or a 

municipality is not an insurer nor liable as a guarantor 
of the quality of the water it furnishes to its customers 
in the customary means of pipes and faucets, and can¬ 
not be held liable for injuries caused by impure water 
furnished by it unless it knew or ought to have known 
of the impurity;” its duty is that of exercising reason¬ 
able care and diligence. 

(c) “A taker of water from the pipes of a system 
of water works of a water corporation or a municipal¬ 
ity does not by the mere taking make known, either 
expressly or by implication, to the seller of the water 
the particular purpose for which the water is required, 
and cause it to appear that he relies as to the whole¬ 
someness of the water on the seller’s skill and 
judgment.” 

43 . 

(1) “Merchantable” has been defined as “at least 
a medium quality of goodness.” 184 App. Div. (N. 
Y.) 302. (1918). 

(2) In all sales where the seller deals in the goods 
that are the subject of sale. 171 N. Y. S. 662 (1918). 

(3) None. 164 N. Y. S. 377 (1917). 


54 Sales PROBLEMS AND QUESTIONS 

44 . 155 N. Y. S. 547 (1915)- 

Judgment for the defendant. “The use of this 
phrase (‘as is’) does not change the requirement that 
the goods must be of the kind and quality represented 
by sample, but refers simply to the condition of the 
goods. The goods delivered must be ‘pussy willow’ 
taffeta of the quality of the sample, even if in a dam¬ 
aged condition.” 

45 . Sales Act, Section 69. 

(1) (a) Accept or keep goods and recoup by way 

of diminution or extinction of the price. 

(b) Accept or keep goods and maintain an 
action for damages. 

(c) Refuse to accept the goods and maintain 
an action for damages. 

(d) Rescind the contract and recover pay¬ 
ments. 

(2) Sec. 69 (6).—“The measure of damages for 
breach of warranty is the loss directly and naturally 
resulting, in the ordinary course of events, from the 
breach of warranty.” 

(3) Sec. 69 (7).—“such loss, in the absence of 
special circumstances showing proximate damage of a 
greater amount, is the difference between the value of 
the goods at the time of delivery to the buyer and the 
value they would have had if they had answered to the 
warranty.” 

If there are special circumstances showing proximate 
damage of greater amount, such as loss of profits, the 
buyer may recover this also. The amount is estimated 
by the jury. 


IN COMMERCIAL LAW 


Sales 55 


46 . 

(1) The seller has title to the goods. 

(2) The buyer has possession. 

(3) It is desirable to have such sales recorded in 
order to make them valid against third parties. If 
they are not recorded, subsequent purchasers from or 
creditors of the buyer could get good title to the prop¬ 
erty and thus defeat the rights of the seller. 

47 . 

(1) A chattel mortgage is a conditional sale of 
personal property to insure the payment of a debt or 
the performance of a certain obligation. 

(2) The mortgagee has the title. 

(3) The mortgagor, usually, has possession. 

(4) It is desirable to have chattel mortgages re¬ 
corded in order to make them valid against third 
parties. If they are not recorded and the mortgagor 
retains possession of the chattels, subsequent purchas¬ 
ers from or creditors of the mortgagor could get good 
title and thus defeat the rights of the mortgagee. 

48 . 168 N. Y. S. 682 (1918). 

(1) The memorandum must show: 

(a) The fact of agreement. 

(b) The essential terms of the agreement. 

(c) The names of the parties thereto. 

(2) No. The terms of the agreement may be con¬ 
tained in a series of correspondence or a number of 
different writings. The gist of the statute of frauds 
does not relate to any particular form of agreement, 
but is simply this: Oral evidence may not be intro¬ 
duced to prove the contract. 


56 Sales PROBLEMS AND QUESTIONS 

(3) The Court’s interpretation was this: 

“The terms of the memorandum drawn by a busi¬ 
ness man should be interpreted in the same sense that 
a business man would understand them, and it seems 
to me quite clear that any business man reading this 
memorandum would interpret it as a statement on the 
defendant’s part that he had offered to sell 100 bar¬ 
rels of high proof grain spirits upon the terms therein 
contained, that the plaintiff accepted these terms, but 
that no delivery should be made until plaintiff had been 
furnished with a trial sample of one barrel, and had 
approved of this sample as complying with the descrip¬ 
tion of “high proof grain spirits.” 

Held, the memorandum sufficient to prove the con¬ 
tract. 

49 . 131 N. E. 174 (Mass., 1921). 

(1) Yes. That is a collateral matter, not an ele¬ 
ment of the contract. It is not a question of proving 
who the other party to the contract is, but of prov¬ 
ing the identity of the one for whom Miller signed. 

(2) Yes. Miller’s signature after the word 
“seller” on the carbon copy. 

(3) Yes. 

50 . 171 N. Y. S. 330 (1918). 

No. Said the court: “If these last words (‘Terms 
as had’) had been omitted from the memorandum, it 
might well be claimed that the memorandum was com¬ 
plete in itself and contained all the essential terms of 
a contract, for the law would imply that payment was 
to be made at the time of delivery. By the insertion, 
however, of the words ‘Terms as had’, the memoran- 


IN COMMERCIAL LAW 


Sales 57 

dum itself shows that there were other terms agreed 
upon by the parties, and resort must be had to evidence 
dehors the instrument to determine what these terms 
were.” 

Oral evidence is not admissible to prove the mean¬ 
ing of “terms as had”, consequently, the memorandum 
cannot be used to prove the contract and the plaintiff 
fails. 

51 . 182 N. Y. S. 477 (1920). 

Yes. In this case, the meaning of “terms as had” 
may be proved by a previous writing. 

52 . 164 N. Y. S. 201 (1917). 

No. Reasons: 

(a) It would require-oral testimony to connect the 
postal card with the letter and show that the postal 
card was an acceptance of the order dated January 
26, 1916. 

(b) “The price to be paid or some stipulated means 
of fixing it is an essential element of such a memoran¬ 
dum”, but it is not mentioned, and would have to be 
proved by oral testimony. 

Consequently, the plaintiff fails. 

53 . 182 N. Y. S. 907 (1920). 

(1) No. The memorandum fails to show or to in¬ 
dicate who is the buyer and who is the seller. 

(2) No. In order to recover on contract, plaintiff 
must prove the contract. Since Schwartz had not 
sufficient written evidence to prove the contract under 
the statute of frauds, he may recover nothing. 


PROBLEMS AND QUESTIONS 


58 Sales 

54 . 185 N. Y. S. 79 (1920). 

No. It is impossible to determine from the card 
who is the buyer and who is the seller. 

55 . 163 N. Y. S. 1045 (1917). 

No. It incorporates by reference two unknown 
quantities, an “agreement with your Mr. Kennedy” 
and “later return.” Since oral testimony would be 
necessary to explain these, the letter is not sufficient to 
prove the contract. 

56 . 181 N. W. 719 (Wisconsin, 1921). 

No. The unknown element is the price, which 
would have to be proved by oral testimony. Conse¬ 
quently, the contract cannot be proved under the stat¬ 
ute of frauds and no recovery could be had by either 
party. 


NEGOTIABLE INSTRUMENTS 
Form and Interpretation 

1 . 

(1) The significance of transferability is that one 
may sell or transfer such rights as he has in property. 

(2) The general rule is that one may not pass a 
better title than he himself has. 

(3) The principal characteristic of negotiability is 
that the buyer may acquire better title or rights than 
the seller had. 

2. N. I. L., Sec. 1. 

The requirements of negotiable form are: 

(a) Writing, signed by maker or drawer; 

(b) Unconditional promise or order to pay a 
sum certain in money. 

(c) Payable on demand or at a fixed or deter¬ 
minable future time. 

(d) Payable to order or bearer. . 

(e) Where the instrument is addressed to a 
drawee, he must be named or otherwise 
indicated therein with reasonable cer¬ 
tainty. 

3 . 146 App. Div.; 424 (1911). 

Yes. True, it is not in the usual form, but the es¬ 
sentials required by law are there, and the fact that 
there is a statement of the transaction coupled with it 
does not render it non-negotiable. 

59 


6 o Negotiable lnstr. PROBLEMS AND QUESTIONS 

4 . 271 Pa. St. 554 (1922). 

Yes, binding Cecilia W. Donohoe. It is payable on 
demand. The place of the signature is immaterial. 
The fact that there is a notary’s name and seal in 
the wrong place is immaterial. 

5 . 34 N. J. L. 54. 

No. The promise to pay is not unconditional. 

6. 73 Cal. 214. 

Yes. It has all the elements of negotiability. 

7 . 236 Mass. 453 (1920). 

Yes. The promise ... to pay to the order of 
the payee is absolute and she could by indorsement in 
her lifetime have transferred title, and the indorsee 
could have demanded and enforced payment.” 

8. 201 Mass. 172 (1909). 

No. The words “Upon acceptance” keep it from 
being an unconditional order. 

9 . 151 la. 178 (1911). 

Yes. A negotiable instrument may be payable to 
alternative payees, and the promise to pay is uncondi¬ 
tional. The second paragraph does not qualify the 
absolute promise to pay. 

10. 117 App. Div. 572 (1907). 

No. (a) It is not payable to order or bearer. 

(b) It is payable out of a particular fund— 
“profits” etc.—therefore, is not an uncon¬ 
ditional promise to pay. 

11 . 62 Wash. 438 (1911). 

No. The note standing alone would be negotiable. 
But even though there are apparently two instruments, 


IN COMMERCIAL LAW 


Negotiable Instr. j 


they were inseparably linked together and must be con¬ 
strued as one instrument. The second part modifies 
the note by making it payable in wheat, and a nego¬ 
tiable instrument must be payable in money only. 

12. 91 Wash. 621 (1916). 

Held to be a negotiable check under the Washing¬ 
ton statute. “Payable at” a bank was held to be 
“equivalent to an order on a bank to pay the amount 
called for.” The fact that there is a statement of the 
transaction is immaterial. 

13 . 82 W. Va. 632 (1918). 

Yes. It contains the essential elements of negotia¬ 
bility. The memorandum on the margin is “no more 
than a mere statement of the transaction which gave 
rise to the instrument,” and is immaterial. 

14 . 162 la. 433 (1912). 

Yes. The extension of time is based upon a con¬ 
tingency that is bound to be determined in 1915, conse¬ 
quently, does not affect the negotiability. The essen¬ 
tial elements are present. 

15 . 14 Idaho 87 (1908). 

(1) The court said: “This is an express contract 
to the effect that the time of payment may be extended 
to any one or all of the sureties, guarantors, indorsers 
or makers of the note without notice to all or any one 
of them.” 

(2) The effect of that is to make the time of pay¬ 
ment uncertain and not determinable by the instrument 
itself. 


62 Negotiable Instr. PROBLEMS AND QUESTIONS 

(3) The effect of that is to make the note non- 
negotiable. 

16 . 94 Wash. 504 (1917). 

No. The clause introduces a contingency the hap¬ 
pening of which is uncertain—it may or may not hap¬ 
pen. If the contingency is bound to occur, the fact 
that the time at which it may occur is uncertain does 
not affect the negotiability of the note. But if it is un¬ 
certain that the contingency may happen at all—it may 
or may not happen—the note is rendered non-nego- 
tiable even though the contingency actually happens. 

17 . 21 Mich. 254. 

The clause renders the note non-negotiable. 

“The maturity of this instrument was liable to be 
hastened or postponed by the action of the corpora¬ 
tion.” The contingency is so uncertain as to time of 
payment as to render the note non-negotiable. 

18 . 163 Cal. 485 (1912). 

No. It will be observed that the clause relating to 
extension of time becomes effective after maturity. 
Consequently, the date of the maturity of the note is 
not rendered uncertain. The note contains all the es¬ 
sential elements and is negotiable. 

19 . 137 Ky.^362 (1910). 

(1) No. It is not payable to “order” or “bearer.” 
Said the court: “It will thus be seen that it was uni¬ 
formly held that, in order to make a note or a bill 
negotiable, the words ‘to order’ or ‘to bearer’, or 
equivalent words, must be used in the body of the 
note,” 


IN COMMERCIAL LAW Negotiable Instr. 63 

(2) Yes. It is a contract the rights of which may 
be transferred or assigned. 

It must be borne in mind that to say that an in¬ 
strument is not negotiable does not say that it may 
not be transferred or assigned. If it is not negotiable, 
the buyer acquires only the rights that the original 
payee had, and all the defenses that may have been set 
up against the latter are equally good against the 
holder. If it is negotiable, the buyer may acquire 
better rights than the original payee had, and certain 
defenses that would be good against the latter would 
not be good against the holder. 

20. 145 App. Div. 422 (1911). 

No. It is not payable to “order” or “bearer”. 

21. 156 App. Div. 807 (1913). 

No. It was payable neither to order nor bearer, 
nor was it payable at a “determinable future time”. 

22. 161 App. Div. 827 (1914). 

No. It is not payable to order or bearer. 

23 . 39 Misc. (N. Y.) 98 (1902). 

Judgment for the plaintiff. The statute referred to 
applied to lost “negotiable” paper. The certificate in 
this problem was not “negotiable,” because it was not 
payable to order or bearer, consequently, was not 
affected by the statute. Since it was not negotiable 
and was “assignable only on the books of the Com¬ 
pany”, the bank was in no danger of suffering a loss 
by issuing a new certificate or paying the amount to 
the depositor. 


64 Negotiable Instr. PROBLEMS AND QUESTIONS 

24 . 88 Neb. 187 (1911). 

No. There is no designated drawee in the instru¬ 
ment. 

25 . 273 Fed. 550 (1920). 

Payable to bearer. Section 9, sub-division (3). 

26 . N. I. L. Section 6. 

(1) None. (2) None. (3) None. (4) None. 
(5) None. 

All these are immaterial elements. Not a one of 
them has any effect upon the negotiable character of 
the instrument whatever. 

27 . N. I. L. Section 7 (2). 

(1) It is payable on demand. 

(2) A check. 

28 . 127 N. Y. 92 (1891). 

(1) “A promissory note is defined to be a written 
engagement by one person to pay absolutely and uncon¬ 
ditionally to another person therein named, or to the 
bearer, a certain sum of money at a specified time or 
on demand.” (Story on Prom. Notes. §1.) 

(2) No. Consideration is presumed. 

29 . 127 N. Y. 92 (1891). 

(1) It is a valid promissory note. 

(2) No. It does not comply with the require¬ 
ments for negotiability. 

30 . 131 N. Y. 462 (1892). 

(1) Held to be a valid promissory note. “The ac¬ 
knowledgment of indebtedness and that it is due im¬ 
plies a promise to pay.” 


IN COMMERCIAL LAW Negotiable lnstr. 65 

(2) No. It does not comply with the requirements 
of negotiability. 

31 . 146 App. Div. 864 (1911). 

(1) It is a valid promissory note. 

(2) It is payable on demand; “and in the event pf 
my death” etc., “is mere surplusage and does not post¬ 
pone the time of payment until the death of the 
maker.” 

32 . 147 Mo. App. 88 (1910). 

(1) A promissory note. “Acknowledgment of the 
indebtedness implies a promise to pay.” 

(2) No. It does not contain words of negotia¬ 
bility. 

33 . 227 S. W. 833 (1921). 

The court said not. It contains no express promise 
or order to pay. And, said the court, “The instrument, 
standing alone and without extrinsic evidence is so in¬ 
definite and uncertain that it could not be said that it 
contains even an acknowledgment of an indebtedness 
from the defendants to plaintiff.” 

34 . 172 App. Div. 75 (1916). 

No. The reason is Section 15, N. I. L.: 

“Where an incomplete instrument has not been de¬ 
livered it will not, if completed and negotiated, with¬ 
out authority, be a valid contract in the hands of any 
holder, as against any person whose signature was 
placed thereon before delivery.” 

35 . 65 Misc. 1 (1909). 

Judgment for the bank. A special relationship 
exists between bank and depositor. A depositor owes 


66 Negotiable Instr. PROBLEMS AND QUESTIONS 

“a duty to the bank to put his signature upon a blank 
check only for the purpose of directing it to pay out 
the money and, however slight the risk, the depositor 
is the person who has assumed it.” 

36 . 192 Mo. App. 476 (1916). 

Judgment for the bank. A depositor of a bank 
should affix his signature to a blank check only for the 
purpose of directing the bank to pay out the money. 
A bank is bound to know the signature of a depositor, 
but is not bound to know more than the signature; 
“for in the ordinary course of business the body of 
the check is as often as otherwise filled up by a clerk.” 

37 . 86 N. Y. S. 857 (1904) and Sec. 16 N. I. L. 

No. The check was a completed instrument, and 
being endorsed in blank was payable to bearer. The 
bank that cashed it was a “holder in due course.” In 
the case of a completed instrument in the hands of a 
holder in due course, a valid delivery is conclusively 
presumed, and the holder may collect even though the 
instrument had been previously stolen. The direction 
to stop payment “could not operate to the prejudice 
of a bona fide holder.” 

38. Signature of Agent. 

(r) The four parties whose names appear on the 
instrument. 

(2) W. S. Winegar is liable to holder in due course. 

(3) W. S. Winegar (same). 

(4) George Brown. 

(5) George Brown. 

Mere descriptive titles are not sufficient to relieve 


IN COMMERCIAL LAW 


Negotiable Instr. 67 

the agent. The signature must show that the agent is 
acting for and in behalf of someone else. 

39 . N. I. L. Section 22. 

The endorsement “passes the property therein, not¬ 
withstanding that from want of capacity the corpora¬ 
tion or infant may incur no liability thereon.” 

Consideration 

40 . 

The important differences in the law relating to 
consideration as applied to negotiable instruments and 
other contracts are: 

(1) Ordinarily, the consideration for a contract 
must be alleged and proved; whereas, in the case of 
negotiable instruments, it is presumed that there was 
consideration for the instrument unless and until it be 
shown that there was no consideration. 

(2) Again, “consideration must be present or 
future; past consideration is no consideration at all.” 
This rule does not apply to negotiable instruments, in 
which case a past consideration is sufficient. 

Negotiation 

41 . 

(1) Pay to the order of 

Richard Roe 

John Doe. 

(2) John Doe. 

(3) An indorsement 

for “collection and credit”; or, 

“pay to any bank or banker” ; or 
“for deposit.” 


68 Negotiable Instr. PROBLEMS AND QUESTIONS 


(4) An indorsement 

“without recourse”. 

(5) An indorsement 

“by recourse after all security has been 
exhausted. 

42 . 

“Aron Lieghton”. The minimum requirement is 
that the indorsement be of the name exactly as it 
appears on the face of the instrument. 

Holder in Due Course 

43 . N. I. L., Section 52. 

“A holder in due course is a holder who has taken 
the instrument under the following conditions: 

“ (1) That it is complete and regular upon its face; 
“(2) That he became* the holder of it before it was 
overdue, and without that it had been previously dis¬ 
honored, if such was the fact; 

“(3) That he took it in good faith and for value; 
“(4) That at the time it was negotiated to him he 
had no notice of any infirmity in the instrument or 
defect in the title of the person negotiating it.” 

Liability of Parties 

44 . 

No. The liability of each of these parties is pri¬ 
mary and absolute; each “engages that he will pay it 
according to its tenor.” 

45 . 55 Mont. 146 (1918). 

Held, liable as maker. “ ‘Under the negotiable in¬ 
struments law it may be regarded as well settled that 


IN COMMERCIAL LAW Negotiable Instr. 69 

the accommodation maker or acceptor is primarily 
liable, . . . without regard to whether the party 

had knowledge of the relation subsisting be¬ 
tween the accommodation maker and the principal 
debtor.’ ” 3 R. C. L., p. 1276. 

46 . N. I. I., Section 63. 

“A person placing his signature upon an instrument 
otherwise than as maker, drawer or acceptor, is 
deemed to be an indorser; unless he clearly indicates 
by appropriate words his intention to be bound in 
some other capacity.” 

47 . N. I. L., Sections 65 and 66. 

“Every indorser who indorses without qualification, 
warrants to all subsequent holders in due course: 
Absolute Contract: 

(1) That the instrument is genuine and in 
all respects what it purports to be; 

(2) That he has a good title to it; 

(3) That all prior parties had capacity to 
contract; 

(4) That the instrument is at the time of 
his indorsement valid and subsisting. 

Conditional Contract: 

And, in addition, he engages that on due pre¬ 
sentment, it shall be accepted or paid, or both, 
as the case may be, according to its tenor, and 
that if it be dishonored, and the necessary pro¬ 
ceedings on dishonor be duly taken, he will pay 
the amount thereof to the holder, or to any 
subsequent indorser who may be compelled to 
pay it.” 


yO Negotiable Instr. PROBLEMS AND QUESTIONS 

48 . 

It is a conditional contract in the nature of a guar¬ 
anty, a “promise to answer for the debt or default of 
another, and makes the indorser secondarily liable. 

49 . 

Primarily Liable: 

Maker and Acceptor. 

Secondarily Liable: 

Indorsers; the drawer of a bill, after the bill has 
been accepted; any others who have expressly 
qualified or modified their liability. 

50 . N. I. L., Section 65. 

The contract or warranty of an indorser “without 
recourse”, as well as everyone who negotiates an in¬ 
strument by delivery only, is: 

“(1) That the instrument is genuine and in all 
respects what it purports to be; 

(2) That he has a good title to it; 

(3) That all prior parties had capacity to contract; 

(4) That he has no knowledge of any fact which 
would impair the validity of the instrument or render 
it valueless ” 

Note that sub-divisions (1), (2), and (3) are the 
same as for a general indorser, that sub-division (4) 
is changed from an absolute warranty of validity and 
value to a warranty of lack of guilty knowledge, and 
that there is no warranty of payment. 

51 . N. I. L., Section 70. 

The necessity arises out of the conditional liability 
of indorsers and the drawer. Their warranty of pay- 


IN COMMERCIAL LAW Negotiable Instr. 71 

ment is conditioned upon due presentment to and de¬ 
mand of payment from the person primarily liable, and 
due notice of the failure of such party to pay. 

52 . N. I. L., Section 58. 

Any defense that could be set up “if it were non- 
negotiable”, i.e., defenses that may be set up in the 
case of simple contracts, such as, fraud, duress, want 
of consideration, payment, failure of consideration, etc. 

53 . 

Absolute defenses, good even against a holder in 
due course, are: 

(1) Want of execution and delivery as and for a 
negotiable instrument (a stolen, incomplete instru¬ 
ment) ; 

(2) Forgery; 

(3) Lack of mental capacity (infancy, imbecility) ; 

(4) Illegality by which a statute specifically de¬ 
clares such instrument to be void; 

(5) Material alteration to the extent of the altera¬ 
tion. A holder in due course may recover according 
to its original tenor. N. I. L., Sec. 124. 

54 . 

Only one—the forgery of his own indorsement . 
All other defects are covered by his warranty. 

55 . 192 Pac. 417 (1920). 

He has a right of action for damages for breach 
of the warranty contained in N. I. L. Section 65, sub¬ 
division (4), and may recover all that he paid for the 
note plus interest. 


72 Negotiable lnstr. PROBLEMS AND QUESTIONS 

56 . N. I. L., Section 143. 

“Presentment for acceptance must be made: 

(1) Where the bill is payable after sight, or in 
any other case where presentment for acceptance is 
necessary in order to fix the maturity of the instru¬ 
ment; or 

(2) Where the bill expressly stipulates that it shall 
be presented for acceptance; or 

(3) Where the bill is drawn payable elsewhere 
than at the residence or place of business of the 
drawee. 

57 . N. I. L., Section 152. 

Formal protest is necessary in the case of dishonor 
of foreign bills—that is, those drawn in one State and 
payable in another State or country. 


IN COMMERCIAL LAW 


Agency 73 


AGENCY 

1 . 

The usual significance of the term agent is that an 
agent is one who negotiates or treats with third parties 
in commercial matters for another. 

2 . 

A general agent is one who is authorized to transact 
all of his principal’s business of a particular kind or 
in a certain place. 

3 . 

A special agent is one who is appointed for a special 
purpose or to transact a particular piece of business. 

4 . 

The scope of authority of a general agent is real and 
apparent, i.e., both that which was actually conferred 
upon him by his principal and that which he appears 
to have by virtue of the authority given. 

5 . 

A special agent has only real authority—that which 
was actually conferred upon him by his principal. 

6 . 

(1) Yes. The Statute of Erauds does not require 
the agent’s authority to be in writing. It is the con¬ 
tract that is to bind the parties, one to buy and the 
other to sell the land, that must be in writing. In this 
case, that conract was in writing, consequently, it is 


74 Agency PROBLEMS AND QUESTIONS 

good even though the agent’s appointment was by 
parole. 

(2) An agent’s authority is required to be under 
seal when the instrument he is to execute is required 
by law to be under seal. 

(3) Exceptions to (2) above are: 

(a) When the agent signs the contract in the 
presence and under the direction of his 
principal; 

(b) When the agent signs as a member of his 
firm; 

(c) When the agent signs for a corporation. 

(4) In order to appoint an agent, one must be com¬ 
petent to make contracts. The attempt to appoint an 
agent by one incompetent to make contracts is usually 
considered to be void. (Example, Infants.) 

(5) In order to be an agent, competency means 
sufficient intelligence to understand and carry out the 
directions of the principal, for the agent is merely the 
medium through which the principal negotiates. There¬ 
fore, an infant may be an agent. 


7 . 

(1) “If, with full knowledge of what the agent has 
done, the principal ratify the act, the ratification will 
be equivalent to an original authority.” 

(2) The authorities differ. In some states one 
may, and in others one may not. 

8. 108 Mich. 625 (1896). 

(1) The judgment will depend upon whether or not 
Clark & Co. can be estopped from denying the author- 


IN COMMERCIAL LAW 


Agency 75 

ity of Pressburg. In order to work out an estoppel, 
Dillman would have to show on the part of Clark & 
Co. “conduct calculated to mislead, and it must be 
under circumstances which justify the claim that the 
alleged principal should have expected that the repre¬ 
sentations would be relied and acted upon; and, fur¬ 
ther, it must appear that they were relied and acted 
upon, in good faith y to the injury of an innocent party.” 
If Dillman could make out such a case for himself, he 
should have judgment; if not, judgment should be 
for Clark & Co. 

(2) 167 N .Y. 244 (1901). 

Judgment for the plaintiff. The doctrine of estoppel 
was invoked, and may be applied thus: 

True enough, Mr. Defendant, you are not author¬ 
ized to engage in dentistry and Mr. Hayes is not, in 
fact, your agent. But you represented that you were 
conducting such a department, and did it in such a way 
that this woman was led to believe that the dentist was 
your agent, she relied thereon and was injured. Now, 
then, as regards this plaintiff, you will not be heard to 
deny, in order to relieve yourself from liability, that 
which you previously held out to be true for the pur¬ 
pose of deriving a benefit. 

9 . 47 Minn. 250 (1891) - 

. (1) Judgment for the plaintiff for $6.50—the cost 
of repair. Judgment for the defendant on the charge 
of the diamond ear-rings ($65). Note the following 
language of the court: “The real foundation of the 
husband’s liability in such cases is the clear legal duty 
of every husband to support his wife, and to supply her 


76 Agency PROBLEMS AND QUESTIONS 

with necessaries suitable to her situation and his own 
circumstances and condition in life.” 

It was held that the diamond ear-rings were not 
necessaries. Consequently, unless the plaintiff could 
show actual authority conferred by the husband or a 
situation giving rise to the doctrine of estoppel (such 
as, having paid other bills of a similar character), he 
may not recover. It was not necessary to prove the 
repairs to be necessaries, because the husband admitted 
his obligation therefor. 

(2) When suing a husband for necessaries fur¬ 
nished, the plaintiff must show: 

(a) That the husband refused or neglected to 
provide a suitable support for his wife, 
and 

(b) That the articles furnished were neces¬ 
saries. 

10. 98 Ind. 358 (1884). 

(1) No. 

(2) Judgment for the plaintiff (surgeon) on the 
ground that he was employed by a representative of 
the company, authorized to act through an agency 
based upon “necessity.” 

“If the conductor is the only agent who can repre¬ 
sent the company, then it is inconceivable that he 
should, for the purposes of the emergency, and during 
its existence, be other than the highest officer. The 
position arises with the emergency, and ends with it.” 

11. 121 Ind. 353 (1889). 

Judgment for the defendant (Railway Company). 
The facts show that the services of Dr. Smith were 


IN COMMERCIAL LAW 


Agency 77 

more than was necessary. The court said that the 
conductor “had authority to do what the emergency 
demanded, in order to preserve his injured fellow-em¬ 
ployee from serious harm, but he had no authority to 
do more.” Note, also, the significance of the follow¬ 
ing language of the court: “It is possible that Dr. 
Smith may be entitled to compensation for one visit, 
that made in obedience to the telegram, for it may be 
that he had a right to act upon it at once, but when he 
found the injured man attended by a competent sur¬ 
geon he had no right to continue to give the case at¬ 
tention, and charge the company.” 

12 . 

The obligations of a principal to his agent are Com¬ 
pensation, Reimbursement, and Indemnity. 

13 . 

The obligations of an agent to his principal are 
Obedience, Prudence, Good Faith, and Accounting. 

14 . 141 Mich. 87 (1905). 

Judgment for the defendant. The articles pur¬ 
chased by Hughson were not within the scope of the 
business of the defendant in New York, consequently, 
the agent’s acts did not bind his principal. 

15 . 50 Vt. 78 (1877). 

Judgment for plaintiff. A general agent has no ap¬ 
parent authority to appropriate to the payment of his 
own debts property belonging to his principal. 

16 . 78 Wis. 167 (1890). 

Judgment for plaintiff. It is obvious that McQuade 
was acting for defendants in the business and not for 


78 Agency PROBLEMS AND QUESTIONS 

himself, and whatever he said or did on that occasion 
was in their behalf. “He had authority to compel the 
sub-contractors to keep sufficient men on the work to 
fulfill their contracts with defendants. If, to do this 
effectually, it was necessary to pledge his principals to 
pay the board bills of the laborers (and it must be as¬ 
sumed that it was), he had apparent if not actual au¬ 
thority to charge the defendants with such liability.” 

17. 68 Wis. 465 (1887). 

(1) When it is the usual thing to do. 

“An agent employed to sell, without express power 
to warrant, cannot give a warranty which shall bind 
the principal, unless the sale is one which is usually at¬ 
tended with warranty.” 

(2) Custom at the place of the buyer. 

“It would seem, however, that to be binding upon 
the defendants, such custom should be known to them 
or exist in their section of the country.” 

(3) If it was not customary to warrant fish, and 
such custom was known to the defendants or existed in 
their section of the country, then the agent would have 
no apparent authority to warrant, the warranty would 
not bind his principal, and judgment should be for the 
plaintiff. Otherwise, judgment should be for defendant. 

18 . 71 Conn. 401 (1899). 

No. The implied authority of a real estate broker, 
“generally speaking, is only to find a purchaser who 
is willing to buy the land upon the terms fixed by the 
owner. He has no authority to bind the principal by 
signing a contract of sale.” The letter did not author¬ 
ize the brokers to sell the land. 


IN COMMERCIAL LAW 


Agency 79 


19 . 92 Tenn. 154 (1893)- 

Judgment for plaintiff. The authority to collect 
accounts carries with it no real or apparent authority 
to indorse the checks received in payment of those ac¬ 
counts. “The indorsement of the check was not a 
necessary incident to the collection of accounts.” 

And in an Indiana case the court said: “The weight 
of authority seems to be in favor of the contention 
that authority to endorse commercial paper 
can only be implied, where the agent is unable to per¬ 
form the duties of his agency without the exercise of 
such authority.” 

20. 74 Minn. 41 (1898). 

“It is a well established general rule of commercial 
law, applicable to all cases of implied agencies, that 
no authority will be implied from an express authority, 
unless it is positively needful for the performance of 
the main duties contemplated by the express authority.” 

21. 54 Mich. 649 (1884). 

$88.75. The payment of $20 to the clerk had no 
effect whatever upon defendant’s account, because the 
clerk was without authority to collect. “The usual em¬ 
ployment of a clerk in a retail store is to sell goods to 
customers or purchasers, and it is implied from such 
employment that he has authority to receive pay for 
them on such sale. But there is no implication from 
such employment that he has authority, after the goods 
are delivered and taken from the store, to present bills 
and collect money due to his employers, because it is 
not in the scope of the usual employment of such 
clerks” 


80 Agency PROBLEMS AND QUESTIONS 

22. 152 Mass. 117 (1890). 

(1) Upon the representations relating to the 
amount of timber and location of the land. They were 
matters of fact. The value of the land was a matter 
of opinion. 

(2) Special agent. 

(3) Yes. A principal is liable in a civil action for 
the “neglect, fraud, deceit, or other wrongful act of his 
agent, while he is acting in the business for which he 
was employed by the principal.” And it is immaterial, 
in this connection, whether the agent is general or 
special. 

23 . 36 N. Y. 427 (1867). 

(1) The relationship was that of principal and 
agent—a fiduciary relation, requiring the exercise of 
the utmost good faith on the part of the agent. 

(2) Judgment for the plaintiff. “The making of 
a purchase from himself, without authority from the 
plaintiff, was a constructive fraud, in View of the fidu¬ 
ciary relations which existed between the parties.” 

24 . 142 Penn St. 25 (1891). 

Judgment for plaintiff. “It is against public policy 
and sound morality for a man to act as broker for both 
parties, unless that fact is fully communicated to 
them.” In such case, the agent loses his right to com¬ 
mission from either party. 

It should be noted, however, that the gist of the 
wrong is the attempt to act for both parties when the 
agent “is placed under a direct inducement to violate 
the confidence reposed in him by another.” 113 Mass. 
133 - 


IN COMMERCIAL LAW Agency 81 

In the present case, the obligation and interests of 
the agent are necessarily inconsistent. 

If, on the the other hand, the broker is merely a 
go-between to bring buyer and seller together, the 
latter to do their own negotiating, the agent may prop¬ 
erly accept commissions from both parties. 

25 . 94 Mich, ioo (1892). 

(1) In problem 24 the agent had a discretionary 
power to make the bargain. He was to get all he 
could for the property for the seller, and buy it for 
as little as he could for the buyer. 

In the present case, he had no such power. The 
price was fixed by the seller. The agent was employed 
merely to find someone willing to pay that price and 
introduce him to the seller. The buyer and the seller 
made their own bargain. 

(2) Judgment for the plaintiff. “A broker who 
simply brings the parties together, and has no hand 
in the negotiations between them, they making their 
own bargain without his aid or interference, can legally 
receive compensation from both of them, although 
each was ignorant of his employment by the other.” 


82 Partnership PROBLEMS AND QUESTIONS 


PARTNERSHIP 

Based Upon Uniform Partnership Act 

1. U. P. A., Section 6. 

A partnership is an association of two or more per¬ 
sons to carry on as co-owners a business for profit. 

2. U. P. A., Section 7. 

“In determining whether a partnership exists, these 
rules shall apply: 

(1) Except as provided in section 16 (Partnership 
by Estoppel) persons who are not partners as to each 
other are not partners as to third persons. 

(2) Joint tenancy, tenancy in common, tenancy by 
the entireties, joint property, common property, or 
part ownership does not of itself establish a partner¬ 
ship, whether such co-owners do or do not share any 
profits made by the use of the property. 

(3) The sharing of gross returns does not of itself 
establish a partnership, whether or not the persons 
sharing them have a joint or common right or interest 
in any property from which the returns are derived. 

(4) The receipt by a person of a share of the profits 
of a business is prima facie evidence that he is a part¬ 
ner in the business, but no such inference shall be 
drawn if such profits were received in payment: 

(a) As a debt by installments or otherwise; 

(b) As wages of an employee or rent to a 
landlord; 


IN COMMERCIAL LAW 


Partnership 83 

(c) As an annuity to a widow or representa¬ 
tive of a deceased partner; 

(d) As interest on a loan, though the amount 
of payment varies with the profits of the 
business; 

(e) As the consideration for the sale of a 
good-will of a business or other property 
by installments or otherwise.” 

3 . 193 N. Y. S. 838 (1922). 

The intention of the parties. 

4 . 193 N. Y. S. 838 (1922). 

(1) Yes. Their agreement indicated such inten¬ 
tion. 

(a) They were associated together in the en¬ 
terprise. 

(b) There was co-ownership of the lease. 

(c) There was the intention to conduct the 
business as such co-owners for profit. 

(d) They shared the profits as co-owners. 
The situation accords fully with the definition of 

partnership. 

(2) No. He merely shared profits, not as a co¬ 
owner, but as compensation under a contract of em¬ 
ployment. 

5 . 277 Fed. 668 (1922). 

Intent is determined from the agreement and con¬ 
duct of the parties. 

“Intent is a factor that may be considered in any 
finding of fact. True, intent must be gathered from 
the acts of the parties, and not from an unlawful 
desire to avoid liability; that is to say, the parties 


84 Partnership PROBLEMS AND QUESTIONS 

may intend to avoid liability, and may fail to do so 
because their acts and their contract establish a status 
from which liability as a partner follows. But if the 
parties intend to loan money, which is to be repaid 
as fast as the profits permit, we think the intent may 
overcome the effect of the receipt by the creditors of 
the profits of the debtor concern.” 

6. 185 N. Y. S. 103 (1920). 

(1) Yes. 

(2) No. 

The mere fact that two or more persons sign a 
note as co-makers raises no presumption that they are 
partners. 

The prior statement of Cohen is a kind of evidence 
known as “hearsay”, which is not admissible except 
in certain well-defined instances. One of these in¬ 
stances is a previous statement that was against the 
interest of the party making it. This is based upon 
the assumption that a person will not make statements 
against his own interest unless they be true. Cohen’s 
previous statement was an admission that he was a 
partner. This would affix to him the liability of a 
partner, consequently, the statement would be against 
his pecuniary interest. Therefore, the statement is 
admissible to prove his (Cohen’s) liability; but, being 
hearsay, it is not admissible to prove the liability of 
the other persons named. And, since this was all the 
evidence that the plaintiff had, he could not prove that 
the partnership relation existed, therefore, could not 
recover against the other persons named as partners. 


IN COMMERCIAL LAW Partnership 85 

Note. —It is obvious, of course, that this problem 
deals with “evidence” rather than substantive right. 
However, the introduction of a few such problems in 
an elementary commercial law course may be amply 
justified. The author has been impressed time and 
time again, from his experience and observation, that 
in practical affairs it is not enough to have “the law 
on your side”; you must have the evidence of the facts 
necessary to prove that the law is on your side. True, 
it is the business of the lawyer to marshall the evidence 
and present it to the court and jury; but the lawyer 
can marshal only such evidence as has been accumu¬ 
lated by his client in the course of the transactions. 
Too often such evidence as exists has accumulated by 
accident rather than by the intelligent conduct of 
business. Consequently, it is fragmentary and lack¬ 
ing in essential particulars. If this were better real¬ 
ized and transactions uniformly conducted with the 
proper voucher and documentary evidence, there would 
be less so-called miscarriage of justice with the result 
that the party who is actually in the right loses and 
the party who is actually in the wrong wins. 

Applying all this to the present problem, what have 
we? Why, a promissory note with two signatures on 
it, one apparently not representing a legal entity that 
could be sued in law, and the other presumably with¬ 
out any individual property to speak of, so that a 
judgment against him would have been worthless. And 
the plaintiff’s right to recover against Mr. Cohen was 
dependent upon the mere accident that he (the plain¬ 
tiff) happened to know a lawyer who happened to 
know Cohen and remembered that in a previous con- 


86 Partnership PROBLEMS AND QUESTIONS 

versation Cohen had stated that he (Cohen) was a 
partner in that firm! 

The particular lesson herein is that when negotiating 
the transaction the payee of the note should have found 
out whether he was dealing with a corporation or a 
partnership, and required the signatures or indorse¬ 
ments of all whom he intended to hold. The general 
lesson is that it is as important for a business man 
to know when he is safeguarding his rights as it is to 
know what his rights are. 

7 . 182 N. Y. S. 605 (1920). 

Judgment for defendant. There was the associa¬ 
tion of the two persons, the co-ownership of the prop¬ 
erty, and the conduct of the business for their mutual 
profit under an admitted agreement that indicated their 
intention to conduct the business as partners. Conse¬ 
quently, there was a partnership in fact, even though 
the articles of co-partnership had not been signed. 
And when a partnership in fact exists, one partner 
may not sue the others to recover the amount of his 
investment. 

8. 172 Wis. 114 (1920). 

Yes, for the reason that all the requisites of partner¬ 
ship as defined by the Uniform Partnership Act are 
present. 

9 . 214 Mich. 473 (1921). 

(1) No. Void under the statute of frauds. The 
undertaking would be a “joint adventure” ; but whether 
joint adventure or partnership, if real estate is the 


IN COMMERCIAL LAW Partnership 87 

subject-matter, the agreement would have to be in 
writing in order to be enforceable. 

(2) No. The agreement was not to conduct a real 
estate business, but merely to buy and sell one piece 
of land. As was said in 212 Mich. 516, “Very few 
of the indicia of partnerships were present and most 
of them were absent. This was the only property they 
had a common interest in; there was no firm name, 
no firm funds, no firm accounts, no firm letter-heads, 
no firm bank account, no commingling of funds or 
property, no certificate of partnership filed, no agree¬ 
ment as to losses, no time fixed when it would expire.” 

10. 173 Wis. 273 (1920). 

(1) No. “It was no more or less than an agree¬ 
ment between real-estate agents to divide and share 
commissions in certain proportions accruing from the 
sale of a specific parcel of real estate—an arrangement 
very common among real-estate agents.” 

(2) No. “It created no estate or interest in, nor 
any trust or power over or concerning, lands, nor was 
it a contract for the sale of any lands or any interest 
in land.” 

11 . 277 Fed. 668 (1922). 

No. Their interest in the management and profits 
was merely for the purpose of securing payment of 
debts owed to them by the old partnership, which 
debts had to be assumed, of course, by the new part¬ 
nership. Under those circumstances, a voice in the 
management and the receipt of a share of the profits 
raise no presumption of a partnership relation. The 
other requisites of partnership were lacking. 


88 Partnership PROBLEMS AND QUESTIONS 

12. 135 Md. 162 (1919). 

Judgment for the plaintiff. 

The partnership relation is established in this case 
by estoppel. “The terms of those agreements as exe¬ 
cuted, were consistent only with the understanding 
that he (Walter F. Oldfield) was interested jointly 
with his brother in the automobile shop for which the 
gasoline and oil contracted for were to be supplied.” 
Consequently, since the conduct of the Oldfields was 
such as to convey the impression that Walter was a 
partner, and this apparent relationship was relied upon 
by Blaustein in extending credit, with the assent of 
Walter, the latter is now liable to Blaustein on the 
debt as though he had been a partner. 

13 . U. P. A., Section 8 (3). 

Yes, under the Uniform Partnership Act (U. P. 
A.). The above section provides: “Any estate in real 
property may be acquired in the partnership name. 
Title so acquired can be conveyed only in the partner¬ 
ship name.” 

Sections 8 (3) and 10 (1) U. P. A., were intended 
to change existing law on this subject. 

14 . f 116 Atl. 364. 

Supreme Court of 
[Pennsylvania, 1922. 

(1) On appeal the judgment was reversed. 

(2) In reversing the judgment the Supreme Court 
answered the reasons of the lower court substantially 
as follows: 

(a) “Partners are jointly liable for the debts 
of the firm.” This is an obligation im- 


IN COMMERCIAL LAW Partnership 89 

posed by law. When one partner acts in 
the capacity of agent for the partnership, 
they are bound by his act, even though 
they do not expressly assume any liability. 
That is the very purpose and intent of the 
law. 

(b) “In the absence of express or implied 
notice to the contrary, each partner is the 
agent of his copartners, authorized to bor¬ 
row money for the firm, and to give obli¬ 
gations therefor.” This is also an obliga¬ 
tion imposed by law. U. P. A. Section 
9 

(c) As indicated in the statement of facts, 
(< the note was drawn for the benefit of the 
firm, was indorsed by the plaintiff as an 
accommodation to it, was discounted for 
it, and the proceeds received by it. As 
between plaintiff and the firm, this, of 
course, makes the latter liable for the in¬ 
debtedness, and entitles him to recover 
against the individual partners 

as soon as he (plaintiff) was compelled to 
pay the firm debt; and this is so even 
though their names do not appear on the 
obligation.” 

15 . U. P. A. Section 12. 

The doctrine of “notice or knowledge” as between 
partners does not apply “in the case of a fraud on the 
partnership committed by or with the consent of that 
partner.” 


90 Partnership PROBLEMS AND QUESTIONS 

16 . 126 Va. 319; also U. P. A., Section 13. 

All of the partners are liable for the wrongful or 
negligent act of one of the partners. 

17 . 123 N. Y. S. 583; U. P. A., Section 15 and annotations. 

(1) Each partner is absolutely liable for the pay¬ 
ment of all the firm debts, and this liability attaches 
both to his partnership property and his individual 
property. 

(2) According to U. P. A. Section 15, partners are 
liable: 

(a) Jointly and severally for everything 
chargeable to the partnership by reason 
of the wrongful or negligent act or breach 
of trust of a partner; and 

(b) Jointly for all other debts and obligations 
of the partnership. 

Note: 

The U. P. A. has not resulted in uniformity among 
the states on the kind of liability, that is, whether 
the liability is joint or joint and several. How¬ 
ever, inasmuch as this is a matter of procedure in bring¬ 
ing suits, it is entirely unimportant for purposes of 
instruction in secondary schools. The thing of im¬ 
portance, substantively, in which there is uniformity 
among the states, is that generally each partner is 
liable both in the amount of his partnership property 
and individual property for the firm debts and obliga¬ 
tions. 

(3) Yes. The liability of a partner is binding 
upon his estate. 


IN COMMERCIAL LAW Partnership qi 

18 . U. P. A., Section 17. 

“A person admitted as a partner into an existing 
partnership is liable for all the obligations of the part¬ 
nership arising before his admission as though he had 
been a partner when such obligations were incurred, 
except that this liability shall be satisfied only out of 
partnership property.” 

Of course, he is liable in the same manner as any 
other partner for all obligations arising subsequently. 

19 . U. P. A., Section 18. 

(1) The rights and duties of partners between 
themselves may be whatever they have agreed upon. 

(2) Unless otherwise agreed, the following rules 
apply: 

(a) Contributions shall be repaid, and they 
share profits and losses equally. 

(b) Partnership must indemnify every part¬ 
ner for payments made by him personally 
for firm purposes. 

(c) Each partner is entitled to interest on 
advances beyond the amount of capital 
which he agreed to contribute, from the 
date of the advance. 

(d) Each partner is entitled to interest on his 
capital from the date when such capital 
should be repaid. 

(e) All partners have equal rights in the man¬ 
agement and conduct of the partnership 
business. 

(f) A partner is not entitled to remuneration 
for services to the partnership. 


92 Partnership PROBLEMS AND QUESTIONS 

(g) No person can become a member of a 
partnership without the consent of all the 
partners. 

(h) Partnership controlled by majority in 
conducting partnership business. 

20. U. P. A., Sections 24, 25, 26. 

It is important to distinguish between the personal 
rights and duties of a partner as such, and the property 
rights of a partner. The latter are: 

(1) Rights in specific partnership property. A 
partner is co-owner with his partners of specific part¬ 
nership property holding as a tenant in partnership. 
Notice that a new kind of tenancy is created. It is 
neither joint tenancy nor tenancy in common. It is 
tenancy in partnership f having characterics of its own. 
This relieves it of those disadvantages of the other 
tenancies which were not appropriate to the partner¬ 
ship relation. 

(2) Partnership interest. This is defined as the 
partner’s <( share of the profits and surplus.” Inciden¬ 
tally, this interest is personal property. 

(3) Right to participate in the management. 

21 . 

(1) Property in which the firm deals, i.e., buys and 
sells for profit. 

(2) Property with which the firm conducts busi¬ 
ness. 

22. No. 

23 . No. 

24 . Yes. 


IN COMMERCIAL LAW 


Partnership 93 


25 . U. P. A., Sections 29 and 30. 

“The dissolution of a partnership is the change in 
the relation of the partners caused by any partner 
ceasing to be associated in the carrying on as distin¬ 
guished from the winding up of the business.” 

Termination is the complete winding up of the 
partnership affairs, that is, the final disposition of part¬ 
nership obligations and property. 

26 . U. P. A., Section 27. 

Yes. A conveyance of “partnership interest”, as 
defined by the U. P. A., merely conveys the partner’s 
“right to his share of the profits and surplus.” He 
may retain his co-ownership of partnership property 
and his right to participate in the management, in 
which case his association with the other partners for 
carrying on business does not cease. 


94 Insurance PROBLEMS AND QUESTIONS 


INSURANCE 

1. 48 S. C. 195 (1896). 

(1) Yes. Insurable interest was defined as follows: 
“Whoever may fairly be said to have a reasonable ex¬ 
pectation of deriving pecuniary advantage from the 
preservation of the subject matter of insurance, 
whether that advantage inures to him personally or as 
the representative of the rights or interests of another, 
has an insurable interest.” The insurable interest in 
property must exist at the time of the loss. 

(2) No. If the insurance company knew at the 
time of making the policy that Graham was not the 
sole owner of the property, they could not, without 
intending to perpetrate a fraud, accept the premium 
on a contract of insurance that they intended to be 
void in case of loss by the insured. 

(3) $1,000. 

2. 193 App. Div. (N. Y.) 836 (1920). 

Yes. The insurance company had notice or knowl¬ 
edge of the location of the accessories and machinery. 
(Notice to agent is notice to principal.) There was 
no attempt to cancel the policy for that reason, the 
company continuing to receive the premiums. Conse¬ 
quently, the insurance company may not now avoid 
liability. Said the court: “It is a well-settled rule of 
interpretation of a fire insurance policy that it must 
be liberally construed in favor of the insured, and 


IN COMMERCIAL LAW Insurance 95 

where the words are fairly susceptible of two interpre¬ 
tations the one that will sustain and not defeat the 
claim will be adopted.” 

3 . 

V (I) X ( 2 ) V ( 3 ) X (4) V (5) V (6) X (7) 

V (B) V (9) V (io)X (II)V (I2)V (I 3 )V (14) 

4 - 

(1) 85 N. Y. 162. This question may be and often 
is briefly answered by merely saying that a dwelling 
house is occupied “when some one lives in it”. But 
the question is not quite so simple as that, as will be 
seen by the situations immediately hereafter presented. 
When one “lives in a house” is as difficult to determine 
as when one “occupies” a house. 

In 85 N. Y. 162 the court defined occupancy as fol¬ 
lows: “For a dwelling house to be in a state of occu¬ 
pation there must be in it the presence of human beings 
as at their customary place of abode; not absolutely 
and uninterruptedly continuous; but that must be the 
place of usual return and habitual stoppage.” 

(2) 85 N. Y. 162. 

No. The plaintiff returned to the city; he no longer 
used the summer home as a “place of abode” or as “the 
place of usual return and habitual stoppage”. The 
house was not vacated, but it was unoccupied. 

(3) 39 Hun. (N. Y.) 410. 

Held that plaintiff could recover. Plaintiff had not 
abandoned the place as one of habitual stoppage. 

(4) 13 Hun. (N. Y.) 612. 

Held that the house was not unoccupied. 


96 Insurance PROBLEMS AND QUESTIONS 

(5) 43 Mich. 373. 

Held that the occupancy clause did not apply. 

5 . 

(1) In the case of fire insurance, the insurable inter¬ 
est must exist at the time of loss. In life insurance, 
the insurable interest must exist at the time the policy 
is taken out. Thereafter, the interest may be extin¬ 
guished without any effect upon the policy. 

(2) A fire insurance policy is one of indemnity . It 
assures against “loss”; consequently, the insured re¬ 
covers only the amount of loss, up to and including the 
amount of the policy, but it may be less than the 
amount of the policy. 

A life insurance policy is not one of indemnity, but 
an absolute guarantee of payment of a certain sum of 
money in the event of the death of the one whose life 
is insured. 

6. 197 App. Div. (N. Y.) 145 (1921). 

The court said “no”, that while lifting the mail bag 
produced an unforseen consequence, it was not caused 
through “accidental means”. 

“The means which the plaintiff used to place the bag 
were exactly those which he intended to use and pre¬ 
cisely those he had used on many other occasions. It 
cannot be said that the means were accidental. The 
most that can be said is that the result was accidental. 
An unexpected result followed, but that result did not 
follow through accidental means.” 

7 . 112 Misc. (N. Y.) 248 (920). 

Judgment for the defendant. 

However hideous and execreable the act of the bel- 


IN COMMERCIAL LAW 


Insurance 97 


ligerent may have been, the death was none the less a 
result of war in point of fact. Therefore, according to 
the policy, the plaintiff was not entitled to recover. 


8 . 


Fire insurance being a matter of indemnity, the 
insured cannot recover from all companies more than 
the total amount of his loss. That loss will be pro¬ 
rated among the companies according to the amount 
of the policy issued by each. In this problem the pay¬ 
ments would be as follows: 


Company X, 
Company Y, 
Company Z, 


$2,000. 

4,000. 

6,000. 


Total, 


$12,000. 



98 Innkeepers PROBLEMS AND QUESTIONS 


INNKEEPERS 

1 . 

X (i) V(2) V(3) V(4) X(5) X (6) X (7) 
X (8) X( 9 ) 

2. 117 N. Y. S. 944 (1909). 

Yes. “An innkeeper’s liability for the baggage of 
his guest is not terminated the instant the guest pays 
his bill and leaves the hotel, but continues for such a 
reasonable time thereafter as may be necessary for 
him to secure its removal.” 

3 . 83 Ga. 696 (1889). 

Yes. “Where a hotel-keeper sends his porter to the 
cars, to receive the baggage of persons traveling, and 
baggage is delivered to the porter, and the traveler 
becomes a guest of the hotel, the liability of the inn¬ 
keeper as such for the baggage begins on the delivery 
to the porter, and continues until redelivery to the 
actual custody of the guest.” 

4 . 112 Tenn. 214 (1903). 

(1) Except where changed by statute, the liability 
of an innkeeper for the baggage of a guest is that of 
insurer, that is, an absolute liability, unless the loss 
occurs by reason of the fault of the guest, an act of 
God, or of the public enemy. 

(2) None whatever, unless a proper employee of 
the hotel knew that the baggage was deposited in the 


IN COMMERCIAL LAW Innkeepers 99 

lobby and accepted the custody, in which case the hotel 
would be a gratuitous bailee and liable only for gross 
negligence. The porter had no authority to receive 
the baggage, unless the owner was a guest or subse¬ 
quently became one. 

(3) The porter was a gratuitous bailee. 

(4) No. The hotel never had custody of the bag¬ 
gage, consequently, could not be held liable for its 
loss. 

(5) Only in case the porter was guilty of gross 
negligence, which doesn’t seem likely. Mr. Holohan 
was “out of luck”. 

5 . 98 U. S. 218 (1878). 

(1) A coat-room in a hotel is “only intended for 
the reception of ordinary hand-valises, coats and um¬ 
brellas, (and hats) and never for valuables or 
jewelry.” 

(2) The jury decided that it was negligence. 

(3) Yes. This is a matter of statute, Rut it is not 
usual for statutes for the protection of innkeepers to 
protect them from their own negligence or from the 
negligence or wrong of their servants. 

(4) This question is beyond the scope of the usual 
commercial law course, but it is a very practical one, 
and one that occurs more often in every-day life than 
is realized. 

It was proper to exclude the evidence. The bell-boy 
was not the defendant. They weren’t trying to prove 
anything against him. It was a clever attempt to 
prove the liability of the hotel proprietor by the ad¬ 
mission of a third party as to his own guilt in the com- 


ioo Innkeepers PROBLEMS AND QUESTIONS 

mission of a crime. Anyone can get up and admit 
that he committed a wrong that might involve you. 
That doesn’t prove anything against you. If that 
scheme could be worked, people would be rooked right 
and left. As the United States Supreme Court said: 
“If he was guilty of the offense, the fact should have 
been established by due proof. If he were on trial 
himself, his admission would be competent, but upon 
no principle could he admit away the rights of another 
person” 

(5) The plaintiff loses, unless he found the jewelry. 
He could not recover from the hotel on the facts pre¬ 
sented. 

6. 114 Mo. App. 357 (1905). 

No. Said the court: “It is plain that when plaintiff 
handed the box containing the locket to the hotel clerk 
to keep until supper was over, not apprising him of 
its contents, the hotel company became, at most, a 
gratuitous bailee or depositary and was liable only for 
gross negligence in the care of the property. It as¬ 
sumed no liability as an innkeeper, for the reason that 
the article was one which, under the statute we have 
cited, it was plaintiff’s duty to entrust to the defendant 
to be deposited in the hotel safe.” 

7 . 43 N. Y. 539 (1871). 

Plaintiff was allowed to recover for the watch, etc., 
“under the rule of the common law, making innkeepers 
the absolute insurers of the property of guests”; but 
was not allowed to recover for the money, the latter 
coming within the statutory provision. 


IN COMMERCIAL LAW Innkeepers toi 

In excluding the watch and accessories from the 
meaning of the statute, the court said: 

“A watch is neither a jewel or ornament, as these 
words are used and understood, either in common par¬ 
lance or by lexicographers. It is not used or carried 
as a jewel or ornament, but as a time-piece or chronom¬ 
eter, an article of ordinary wear by most travelers of 
every class, and of daily and hourly use by all. It is as 
useful and necessary to the guest in his room as out of 
it, in the night as the daytime.” 

This doctrine was reaffirmed in 35 N. Y. S. 739 
(1895 )> an d again in 59 N. Y. S. 23 (1899), the latter 
case excluding, also, silver table forks and a silver 
soup ladle from the meaning of the words “jewels or 
ornaments.” 

8. 114 Misc. (N. Y.) 65 (1920). 

(1) No. While the plaintiff was away and the 
trunk was in storage the relation of innkeeper and 
guest did not exist. The relation was that of bailor 
and bailee, in which case the hotel was liable only for 
negligence. 

(2) No. “The defendant, by becoming a bailee of 
plaintiff’s trunks and their contents, was not required 
to and did not assume that the same contained articles 
other than those ordinarily contained in trunks, 
consequently, there was no bailment as to the pendant.” 

9 . 101 Misc. (N. Y.) 298 (1917). 

No. In the first place, the restaurant proprietor 
not being an innkeeper, cannot be held as an insurer of 
the property. In the second place, when the restau¬ 
rant proprietor became bailee of the coat he did not 


102 Innkeepers PROBLEMS AND QUESTIONS 

become bailee of the pocketbook, because he didn’t 
know that the pocketbook was in the coat. In other 
words, the restaurant proprietor had no legal relation 
to the plaintiff whatever with regard to the pocket- 
book—no more than he had to valuables that she might 
have left at home—consequently, he cannot be held on 
any theory for its loss. 


IN COMMERCIAL LAW 


Carriers 103 


COMMON CARRIERS 

1. 

All of them are common carriers (V)* 

2. 154 Pa. 342 (1893). 

(1) The liability of a common carrier is that of 
insurer of the goods, except where the loss is occa¬ 
sioned by: 

(a) Act of God or public enemy; 

(b) Act of the shipper; 

(c) Act of public authority; 

(d) The nature of the goods. 

(2) 

(a) No. The flood did not injure the goods 
at all. 

(b) No. 

(c) No. 

(d) No. 

(e) No. 

(3) Yes, in that its servants never made any at¬ 
tempt whatever to protect the goods. 

(4) No. Said the court in 15 Minn. 279 (1870) : 
“The undertaking is to carry the goods, and to relieve 
the carrier from liability for loss or damage arising 
from negligence in performing his contract, is to ignore 
the contract itself.” 

(5) Yes. The carrier is liable both as insurer* and 
on the grounds of the negligence of its servants. 


io 4 Carriers PROBLEMS AND QUESTIONS 

3 . 148 Mass. 220 (1889). 

Yes. The risks involved were in contemplation of 
the parties in the special contract that was made to get 
the apples to Portland in time for a certain train. 
Consequently, the carrier is liable on the ground of 
negligence in performing the special contract. 

4 . 21 Wis. 21 (1866). 

Yes. “The object of packing is, in general, to secure 
convenience, safety and dispatch in the handling and 
transportation, and not to prevent injury from such 
accidental causes as rain happening in the course of 
transit, against which the carrier is presumed to have 
provided.” 

5 . 42 Ill. 458 (1867). 

No. “In order to charge common carriers as insur¬ 
ers, they must be treated in good faith. . . . Con¬ 

cealment, artifice or suppression of the truth, will re¬ 
lieve them of this liability.” The company should 
have been informed of the fragile nature of the con¬ 
tents of the package. 

6 . No. 

7 . 

A carrier of passengers must exercise a high degree 
of care and is liable for even a slight negligence. 

8 . 

(a) No, not ordinarily. 

(b) Yes. 

9 . 

No. Property is inanimate and incapable of negli¬ 
gence. Therefore, with the exceptions previously 


IN COMMERCIAL LAW Carriers 105 

stated, a carrier may reasonably be held as an insurer 
of the goods. 

Passengers are animate, supposedly intelligent, at 
any rate animated by motor processes of their own. 
Injury may be the result of their own wilful conduct or 
negligence. Therefore, it is not reasonable to hold a 
carrier, as such, an insurer of the lives of passengers. 

10 . Miscellaneous decisions. 

Numbers (1) to (11) inclusive have been held to be 
baggage. (V) 

Numbers (12) to (19) inclusive have been held not 
to be baggage. (X) 

11. 114 Mise. (N. Y.) 537 (1921). 

No. “The facts do not warrant the assumption 
that the bag was left in the custody of the defendant 
so as to make defendant liable to plaintiff as an in¬ 
surer.” The porter was not an employee of the Pull¬ 
man company. 

“Nor is it satisfactorily established that the bag 
was left in the car. Assuming, however, that the red 
cap porter left the bag in the car, plaintiff to make out 
his case was required to show that his loss was sus¬ 
tained through defendant’s negligence.” This he did 
not do. 

12. 112 Misc. (N. Y.) 496 (1920). 

Judgment for the plaintiff. 

“The plaintiff being still the owner of the trunk 
is entitled to its possession. The payment of the fifty 
dollars by defendant in settlement of plaintiff’s claim 
for the loss of his trunk did not pass title thereof to 
defendant. Defendant did not by that payment pur- 


106 Carriers PROBLEMS AND QUESTIONS 

chase the trunk. It merely settled plaintiff’s claim to 
damages because of its loss.” 

13 . 199 App. Div. (N. Y.) 348 (1922). 

(1) Yes. The court said that it was clear that the 

father of the bride acted in their behalf and not for 
himself. * 

(2) The service company was a private, not a com¬ 
mon carrier, consequently, not an insurer of the bag¬ 
gage. 

(3) Yes. The service company was a bailee of the 
baggage. The failure or refusal to deliver the bags 
on demand, unexplained, constituted negligence. 

FIXTURES 

1. Miscellaneous cases. 

Check all of them, (1) to (15) inclusive. 

“A tenant, whether for life, for years, or at will, 
may sever at any time before the expiration of his ten¬ 
ancy, and carry away all such fixtures of a chattel 
nature as he has himself erected upon the demised 
premises for the purposes of ornament, domestic con¬ 
venience, or to carry on trade; provided, always, that 
the removal can be effected without material injury to 
the freehold.” 










































